Questions about Housing Benefit and self employment

Vouchel

I'm considering buying items and selling them on Ebay. I'm getting housing and council tax benefit, and I would like to end this and be self sufficient. Here are some concerns, thoughts and questions that I have about this...

I remember reading somewhere a long time ago that for every pound of income above the eligibility limit (where you'd still get full benefit), they deduct a certain percentage, meaning that I would have to make up for it from my income (of course). But I don't remember what the percentages are for HB and CTX. Does anyone know what they are?

Now if I buy an item for £200, and I mark it up to £250, and Ebay and Paypal take their cut of £20 (I'm making up these figures as I go, just to illustrate), I'll have a profit of £30. Now let's say that this takes me above the amount that I can earn before they make deductions, so now I have £30 extra and the council should use that to make a deduction.

But how would I explain to them that the £230 received is not all profit, and that they should only consider the £30 when making their deduction?

Also how am I supposed to make enough money to not need their help any more? I've done some hypothetical rough calculations and it seems that it would take forever (i.e. profit minus deductions). I really don't want to be on benefits any more, which is why I want to do this, but how on earth does anyone make enough to get off HB and CTX by doing this? In order to build up enough to eventually generate a decent income, I might be tempted spend my rent money and hope that I can get sales each month before the rent is due.

And what if I wish to plough all of the £230 back in to my business? I mean, in theory, couldn't I just keep doing that for a long time, thus effectively having no extra income (because my capital + profit become business expenses)...at least until I have enough coming in to no longer need any benefits? How would I explain this to them?

When the proceeds from a sale go into my Paypal account, is it considered income by the council at that point, or only when / if I transfer it into my normal bank account?

Tax. I don't know much about doing my own taxes as I've never had to do it, but I would definitely make a record of every time I buy or sell an item, until I learn more about this. I would also use one of those tax calculator sites and then put aside the appropriate amount (plus a bit more just in case) so I know where I stand and I'll always be in the black.

These are my thoughts and if anyone (especially anyone who works for the council) can enlighten me, correct me, or point me in the right direction, I'd appreciate it.

Housing_Benefit_Officer

For every £1 additional income .65p is deducted from for Housing Benefit entitlement. As each local authority now runs its own Council Tax Support scheme you will need to check your local rules.

Self employed income is calculated by income minus allowable expenses.

We normally take the last full years trading accounts to calculate the coming years benefit entitlement.

For the newly self employed we use an estimated income given to use by the claimant. After 13 weeks we use 13 weeks figures to calculate the next 13 weeks benefit. and the 26 weeks figures and then 48 weeks figures. Once we have a full years figures we use those for the coming year - although this will depend on your local authorities working practices. Speak to someone at the council to see what they will need.

Vouchel

Thanks.

Ok let me see if I understand.

So, I tell the council "Hey, I'm self employed now, and here's what I think I'll earn over the next 13 weeks".

The council then say "Ok, we're going to pay you x amount for the next 13 weeks based on what you've just told us".

Then after 13 weeks, they say "Right, let's have a look at what you actually earned during that 13 weeks, and we'll make any necessary adjustments (i.e. we'll pay you more, or you pay us some back)". And while you're at it, tell us what you think you'll earn over the next 26 weeks.

And so on.

Is that how it works?

Also, at what point should I tell them anything? Because right now there's nothing to tell, and even when I get started, I don't really know how things are going to go. Should I tell them after my first sale or is it ok to wait a bit until I have something resembling a regular-ish income? I have no idea how much I'll be earning, And I imagine it won't be much to begin with, so if my income is less than the applicable amount, would they still need to know asap?

Vouchel

Bump. I really need some help here.

fishybusiness

I have no idea how much I'll be earning, And I imagine it won't be much to begin with

This!

If you are risking your HB on a business venture and you have no idea about your earnings, expenses and overheads, then you really shouldn't be doing it.

Next....based on the above and your idea to sell on ebay, a marketplace on which one or two other people may sell similar products to you, you are unlikely to stay in business for very long.

Ever heard the phrase 'race to the bottom'? It typifies ebay business models, the small guy rarely makes a living.

Think long and hard before committing cash to it, and write a business plan and cashflow projection. They will at least alert you to your costs, profit margins, and plans for actually making money.