Self employment & Universal Credit (yet again)

edited 30 November -1 at 1:00AM in Benefits & Tax Credits
14 replies 1.8K views
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  • dktreeseadktreesea Forumite
    5.7K Posts
    BBBNH wrote: »
    Thank you.

    So as a lone parent working 16 hours self employed, I need to be clearing NMW every week after my expenses in order to qualify?

    Any idea how many hours lone parents need to increase their hours to once their child is of school age under UC?

    No, that's not right. You just earn whatever you earn. You qualify provided you work the required hours, or if you earn over the earnings threshold, for your particular circumstances. But there are deeming rules. So say your work requirement as a sole parent is 24 hours a week. Then you would need to be working your business for at least 24 hours a week to be "gainfully self employed".

    The next step is to calculate what you would earn if you were earning (i.e. had net profit) the equivalent of the NMW for the number of hours you are required to work. Say that works out to £148 a week or thereabouts (i.e. 24 hours at the NMW. It would be a bit less, because things like income tax and national insurance contributions are deducted when they calculate the earnings threshold). Your UC is then based on the higher of your actual net profit or the deemed income, even if your actual profit is not as high as the deemed income.

    So, for carers of a child between 5 and 13, the number of hours you are required to work is restricted to school hours less an amount for travelling:

    "235. Hours of work will be limited where:

    the claimant is the responsible carer (including adoptive parents, relatives who are the legal carer of a child and parents of a child where the claimant is not the responsible carer but has caring responsibilities for the child) for a child aged 5 to 13 (hours usually limited to school hours with an allowance for travelling time);" (Universal Credit Regulations, 2012)

    Say, as a self employed person, you work 16 hours a week, but earn a net profit of £300 a week. You wouldn't be subject to any work related requirements even though you are not working the full school hours less travelling time (just say this works out to 24 hours a week; the regulations are vague on this) because you are earning over the earnings threshold for your required hours. The NMW for 24 hours is £148 a week. Since you earn well over that, it doesn't matter how many hours you work.

    If on the other hand, the government accepts you are gainfully self employed (so no requirement to look for work) you work at least the hours you are required to work given your child caring circumstances, but earn less than the earnings threshold, e.g. a net profit of only £40 a week, the government will calculate the UC due to you based on the deemed income of £148 a week, not on your actual profits.

    This is why some self employed people are closing their businesses and moving onto JSA, because if they don't the drop in their incomes is going to be savage.

    For example, a family of four with two school age children and both parents full time self employed but with an income from self employment of £2k per annum wouldn't reach the applicable amount for calculation of housing benefit, so would receive the full award or their actual rent, whichever is lower, and the full award for council tax benefit, plus the maximum WTC and CTC plus CB. In some areas of Britain, and no, not just in London, that could come to over £20k per annum, tax free.

    After UC comes in, say the minumum floor for the couple, is FT NMW, (i.e. children are both over 13) so 35 hours per week at the NMW, their deemed income, even after taking income tax and NI contributions off, will be around £10.5k each). That's enough to reduce their benefits by over £13k a year (i.e clawback of the benefit of 65 percent of the income deemed to be earned).
  • dktreeseadktreesea Forumite
    5.7K Posts
    WantToBeSE wrote: »
    I have heard from other threads on here, that under UC rules, a lone parent must work full time (so i imagine 38 hours) once their child is at full time school. Not sure about parents who are part of a couple though.

    35 hours a week, but for UC this only applies to lone parents with children over 13.
  • sammyjammy wrote: »
    This thread is about Universal Credit. Anyone you speak to in DWP on the frontline is likely to know as much as the average man on the street at present, except in the Pathfinder area.

    Yes, I was aware the thread was about EC, but it is likely the limits for hours worked in self employment will be similar for different benefits surely?
  • dktreeseadktreesea Forumite
    5.7K Posts
    bigjl wrote: »
    Yes, I was aware the thread was about EC, but it is likely the limits for hours worked in self employment will be similar for different benefits surely?

    Not really because people who aren't self employed will be subject to conditionality. So, if your child is over 13, say, and you are required to work 35 hours a week but are unemployed, the regulations state that you should therefore be looking for work for the full 35 hours. And even if you have skills, those regulations also say that after a certain time, if you don't get a job matching your skills, you have to be prepared to take any job, even a minimum wage one.

    Self employed people are gainfully employed, so not subject to any conditionality. The quid pro quo is if you want to run your business (and meet the requirements for that business, i.e. it has to be genuine, you have to actually be working in it, running it with the expectation of a profit etc in order for the government to classify you as "gainfully self employed") and only earn £1 a year net profit from it, fair enough, but the taxpayer is only going to cough up support for you to the extent they would have to if you were earning the NMW for your required hours of work.
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