Unpredictable hobby income & Housing Benefit

jonathanmarley

Hi everyone. Just looking for any advice anyone would be kind enough to give on my situation.

I've been doing a hobby for a while now, and as of late has brought in some money which I am feeling uneasy about due to claiming Housing Benefit/Council Tax. This hobby is by no means a steady regular income, it is unpredictable and sporadic. Some months I may get some money for something, others nothing at all. I also have not declared myself self-employed, but due to the income it will obviously be classed as 'work' and be treated as such so I think I should declare myself self-employed.

I'm at a loss as where to start.

Any help or advice would be greatly appreciated.

Thank you in advance.

HappyMJ

If it's a genuine hobby are you spending all the income on the hobby and not actually making any profit.

You can buy things and sell old things without having to declare the money you get for the second hand items as income but doing it regularly or if you're making new items and doing it for profit then it may be considered self employment which you need to inform the HMRC and declare the profit. If you aren't making more than £10,600/year there won't be any tax to pay but you may have to pay National Insurance contributions depending on your profit.

You will then need to keep a set of accounts so you can declare the profit to the council so they can adjust your housing benefit amount.

If you spent a month creating new items and then spent one day selling the new items at a fair for example you can declare the profit spread over the month you spent creating the items instead of the one day you actually made the money on which might not make any difference to your housing benefit claim. You are allowed to earn a small amount each week without it affecting your claim. That may be £10 or £20 a week depending on your circumstances.

jonathanmarley

Thanks HappyMJ, that's helpful. Would that mean I contact the council on a monthly basis with the earnings for each month?

HappyMJ

jonathanmarley wrote: »

Thanks HappyMJ, that's helpful. Would that mean I contact the council on a monthly basis with the earnings for each month?

The profit figures yes. There's quite a lot of expenses you can claim against your income so make sure you know what you can claim as an expense. You may as well maximize your expenditure so you show very little profit so depending on what you do you could buy more stock now to keep your profit low. You never know expanding the business sufficiently might get you off benefits altogether.

collecting

I started off as a hobby business - went self employed with hmrc, council now getting funny that my earnings too low and trying to force me to go back on dole or claim working tax credits - I don't want to do either and they are threatening stopping my rent if I don't apply for "help" - my theory is if they would just let me be, my earnings would eventually increase, without having to pester my doctor (stress/anxiety disorder)

10pence

jonathanmarley wrote: »

I've been doing a hobby for a while now, and as of late has brought in some money which I am feeling uneasy about due to claiming Housing Benefit/Council Tax. This hobby is by no means a steady regular income, it is unpredictable and sporadic. Some months I may get some money for something, others nothing at all. I also have not declared myself self-employed, but due to the income it will obviously be classed as 'work' and be treated as such so I think I should declare myself self-employed.

Curious as to what other benefits you could be claiming, as your 'hobby' could bring those into question.

HappyMJ wrote: »

The profit figures yes. There's quite a lot of expenses you can claim against your income so make sure you know what you can claim as an expense. You may as well maximize your expenditure so you show very little profit so depending on what you do you could buy more stock now to keep your profit low.

Be careful with this as my local council has started to review business accounts and taking excess stock levels into account and reducing housing benefit, as they view it of depraving yourself of income.

densol_2

You cant " buy more stock to keep earnings low " When accounts are calculated at the end of the year - its stock purchased LESS stock in hand - so you can only apply the cost of the stock bought that you actually sold in the relevant tax year.

Thus - cost of stock bought £ 10,000
- stock in hand ( unsold ) £ 8,500
- cost of stock sold. £ 1,500

You can only put £1500 as an expense for that tax year.

Purchasing " equipment " under annual investment allowance can be applied 100% up to the limit but beware councils have different rules from HMRC as to what expenses, allowances etc they allow

fishybusiness

Purchasing " equipment " under annual investment allowance can be applied 100% up to the limit but beware councils have different rules from HMRC as to what expenses, allowances etc they allow

You find yourself doing one set of 'books' every 6 months for the council and a set once a year for HMRC, both with different allowable expenses.

I got around that by running as a limited company within the first year. All accounts relate to the company and I was paid as an employee, rather than a director.

Deprivation of capital can still stand, so you ought not have a few thousand stashed in the company bank account whilst taking minimum wage.........

Housing_Benefit_Officer

fishybusiness wrote: »

You find yourself doing one set of 'books' every 6 months for the council and a set once a year for HMRC, both with different allowable expenses.

I got around that by running as a limited company within the first year. All accounts relate to the company and I was paid as an employee, rather than a director.

Deprivation of capital can still stand, so you ought not have a few thousand stashed in the company bank account whilst taking minimum wage.........

No. You only provide accounts once a year.

When someone starts self employment we ask for a projection of income for the first 13 weeks. After 13 weeks we ask for income and expenditure. Then 13 weeks later we ask for 26 weeks income and expenditure then 13 weeks later we ask for 39 weeks income and expenditure. After 1 year of trading we ask for 1 years income and expenditure. We then use these figures to calculate the following 52 weeks benefit entitlement. Then once a year we ask for a full years self employed accounts. The previous years self employed accounts are used to calculate the following years benefit.

As for being a Director of a Company. This area is complex and confusing and accounts for many many errors and mistakes when calculating Housing Benefit.

It isn't as simple as becoming a Company Director and paying yourself the Minimum Wage - the Company accounts will be scrutinised just in case someone is hiding income and/or capital in their company to enable them to claim benefits.

fishybusiness

Where I live they have asked for bookwork every six months, I don't know how that is applied elsewhere.

It isn't as simple as becoming a Company Director and paying yourself the Minimum Wage - the Company accounts will be scrutinised just in case someone is hiding income and/or capital in their company to enable them to claim benefits.

I didn't say it was simple.

I was pointing out that running as a ltd changes things with respect to the expenses being expressed in a different way by the council when compared to HMRC, and as far as company expenses goes - depreciation, assets and the way a business spends money, it is much simpler running with one system rather than two.

I also did't refer to paying minimum wage only, although in the beginning it will probably be a reality.

I did point out that the rules regarding deprivation of capital come in to play, so using a ltd to stash cash and assets will likely be found out.

Yes, it is a complicated area, and I think made much more complicated by the fact that directors do not have to be employees. but can be office holders only and be subject to Self Assessment rather than PAYE. RTI has made it much more transparent for employed directors, which is my preferred route.

Since 2006 I've run 3 ltd's whilst claiming HB, for various reasons, and have never been asked for accounts. It was expected at the cessation of the first 2 to ensure I wasn't taking assets and/ or money, no one ever asks.

I think we are saying the same thing perhaps from different angles, but the above is entirely my experience.

Housing_Benefit_Officer

fishybusiness wrote: »

Where I live they have asked for bookwork every six months, I don't know how that is applied elsewhere.



I didn't say it was simple.

I was pointing out that running as a ltd changes things with respect to the expenses being expressed in a different way by the council when compared to HMRC, and as far as company expenses goes - depreciation, assets and the way a business spends money, it is much simpler running with one system rather than two.

I also did't refer to paying minimum wage only, although in the beginning it will probably be a reality.

I did point out that the rules regarding deprivation of capital come in to play, so using a ltd to stash cash and assets will likely be found out.

Yes, it is a complicated area, and I think made much more complicated by the fact that directors do not have to be employees. but can be office holders only and be subject to Self Assessment rather than PAYE. RTI has made it much more transparent for employed directors, which is my preferred route.

Since 2006 I've run 3 ltd's whilst claiming HB, for various reasons, and have never been asked for accounts. It was expected at the cessation of the first 2 to ensure I wasn't taking assets and/ or money, no one ever asks.

I think we are saying the same thing perhaps from different angles, but the above is entirely my experience.

We are getting lots of training sessions regarding self employed/company directors etc and what to look for. We have to iron out all potential problems before people migrate over to Universal Credit.