Becoming self employed from working full time and benefits.

etheridge

Hi Folks.
First sorry if this is not the best place to but this question.

Anyway, I'm currently working full time and it's starting to kill me... not working full time, but the stress of what I do.

I was thinking about completely changing direction with my career and becoming self-employed.

Would I be able to claim benefits if I left my job to setup a small business?

My other half works part time (almost full time) and we have two kids.

My concerns are that we have no savings to fall back on so sadly benefits would be the only way to survive until the business took off.

Any advice in this area would be really welcomed!

Steve.

dktreesea

It depends. WTC starts to taper out once you have earned around £7k and then stops completely at around £15k. If you have earned that already this year then you wouldn't be eligible for WTC.

If you are renting, then things like housing benefit depend on the faily income, so how much you get would depend on your partners income as well as your own.

But a word of caution. Under UC, self employed people will be subject to the minimum income floor, where, for benefit calculation purposes, you would be deemed to have a profit of at least the full time national minimum wage, (approx £10k to £11k after tax, I don't have the exact fugires to hand) regardless of whether your actual profit was much lower.

Furthermore, whereas, for the rest of the people on benefits, if their UC award works out lower than what they currently get, what they get now will still be paid, i.e. protected until 2017. This is not the case for self employed people on benefits. The deeming rules for income, i.e. profit, not gross turnover, will be applicable from the day they move onto UC, for established businesses.

For new businesses, you would get a one year sabbatical from these provisions while you set the business up. But if you don't think your business will make at least the FT NMW after a year of operations, I suggest you stick with your day job.

I understand your work is stressful, but you need to take, imho, a more dispassionate look at how to best profit from your labour. Say you are in a job, requiring no capital investment at all, just for you to show up to work, and clearing, say, £400 a week after tax. So £10 an hour for every hour worked, give or take. Being self employed, in terms of labour, full time is no different to working for someone else. You will still work the same hours, possibly more, but maybe you will only clear £0.50 an hour instead of £10 an hour. Are you sure it is worth it, especially with the minimum income floor affecting your benefit subsidy?

Making a living from an undercapitalised business is really hard going. A lot of low income self employed people are doing it because they couldn't get work in the working for someone else PAYE world. Many can't get benefits, because their household income from their partner working is too high. So for them, even if they make only £50 a week, it's better than nothing, which is their current position prior to embarking on their business. If you are completely dependent on your partner for survival, have been unable to get a job and have no access to the benefits system, even £50 a week is a massive incentive to work at your business.