Still confused about reductions and universal credit

jorri

I've spent a lot of time trying to get universal credit, I'm starting a business too but they told me its not yet 'gainful self-employment', so i've got to get first orders in before i can create a business plan and make it viable.
Well at the moment the universal credit .gov.uk pages are down so i can't ask them.

What I'm worried about is reduction rates:
1. Since these first orders would count as a hobby, (I've actually been advised to do this!) they still asked me to announce anything earned. From researching this any income outside of earning has 1:1 reduction. Well if that's the case i might as well close the claim for now, since the expected amount would render too little....Is that the case? Surely there's a threshold or they count as earnings?

2. I don't understand, the Self-Employment rules with minimum income floor. I'm told there's a 65% reduction, yet that would wipe off 8000 fo most people. So surely there's a threshold? Why isn't this clearly explained? Is it just earnings OVER the minimum income threshold that are counted? I'm aware of the 12 months startup time, but that also assumes I earn a figure over 13000 even if i'm not...

3. I'm also looking at New Enterprise Allowance. Would that also cause a 1;1 reduction? If it were, i suppose would be something to switch to, minus the jobsearch element particularly.

-Hopefully someone can answer the questions. If i look at blog posts explaining it, the way they've explained it seems to be missing some vital info, such as a threshold, i.e. they've not explained it inclusive of all the rules involved so it doesn't make sense....Unless they have, in which case UC doesn't make slightest sense, which we all know, but just not to this extent.
I need this whilst setting up the initial phase. How anyone can start a business using this i'm unsure is possible. And whilst in this phase i might not make all expected revenue I could fall back on it, but there's that 35 hours per week of jobsearch, which is a lot for something if unecessary, whilst also trying to do a business startup, and essentially working as a voluntary musician as well a few hours a day too.

annandale

You can claim working tax credits as a self employed person. I dont think even HMRC expect people to be earning NMW x 35 hours a week on start up. I dont claim UC, I'm self employed and Im on a zero hours contract, but on my self employed work, I never made 35 hours a week x NMW, I was always honest about what I earned in my applications for WTC, the work I do can be seasonal, and income can vary that was part of the reason I applied for a zero hours contract, because I wasn't earning enough income and realistically I had to earn.

You should be able to apply for WTC, but you can be spot checked and HMRC can withdraw your WTC if they deem your business not viable.

jorri

Hi its Universal Credit in my area. Was told this replaces tax credits...Though wouldn't be the first time the jobcentre witheld info or outright lied to someone...Anyway I was told I couldn't move onto it. If that's the case otherwise would also be good to know, since some sources say 2017 is full rollout date, however I attempted separate JC and WTC applications and was just directed to UC each time, as well as 'New enterprise allowance' which i got a meeting but was told to come back when there's sufficient data based on orders to compile a viable business plan..

Which is quite a lot worse, since there is now a big divide between areas. They don't expect 35 hrs pw at minimum wage, but they assume you are earning that amount unless you are earning more, that part is definite on UC. WTC hasd something similar looking at it but maybe its a different amount?

What i do know that 35hours of jobseeking, is not something i want to be doing, when I am trying to instead enter self employment...that's a lot of my time, and at half min wage I might add! or less since these reductions might count and is main thing i want to know, if i've spent a few weeks doing jobsearch and get 0 that's pretty dire.

Icequeen99

Some areas can no longer claim tax credits but it depends on your postcode.

You can check here https://www.universalcreditinfo.net - just enter your postcode.

If you are in a UC digital area then you would claim UC instead of working tax credit.

Your self-employment under UC, even if you are not gainfully self-employed - would not be deducted £1 for £1 as it is still self-employed income from earnings. So it would be subject to the 65% taper.

I don't quite understand your questions about the minimum income floor. Basically, after 12 months, if you are not earning your minimum level (for most 35 hours x national living wage) they will ignore your actual earnings and calculate your UC based on an income of 35 hours x NLW. This amount will be your income from earnings and the 65% taper will then be applied.


IQ

jorri

Thanks for the reply.

As I understand what you wrote. The first 12 months you get deductions based on actual earning, rather than the minimum income floor, then?

Then, at the minimum income floor, which is minimum wage, 35 hours per week, that equals about 13000... 65% of that is 8500...so essentially most people would get nothing as my maximum payment from UC can only be around 7000. Am I correct about that?

That on a 7000 or so payment from universal credit, I'd be ruled out of claiming if self-employed after the first 12 months. And during the first 12 months, it would taper to a LOT less, ruling it out entirely at around 10500 income from self employment?

Icequeen99

jorri wrote: »

Thanks for the reply.

As I understand what you wrote. The first 12 months you get deductions based on actual earning, rather than the minimum income floor, then?

Then, at the minimum income floor, which is minimum wage, 35 hours per week, that equals about 13000... 65% of that is 8500...so essentially most people would get nothing as my maximum payment from UC can only be around 7000. Am I correct about that?

That on a 7000 or so payment from universal credit, I'd be ruled out of claiming if self-employed after the first 12 months. And during the first 12 months, it would taper to a LOT less, ruling it out entirely at around 10500 income from self employment?

Yes, that's right. The first 12 months you would still be on the 65% taper, but it is actual income. After that, you are expected to earn the minimum income floor amount, unless you are in a group that is exempt from it.

IQ

jorri

I see. SO it hardly seems worth continuing, and at some point should probably sign off. At least it could help for a month or two.

Icequeen99

jorri wrote: »

I see. SO it hardly seems worth continuing, and at some point should probably sign off. At least it could help for a month or two.

Looking at your post - i suppose the other thing to point out is that once you are classed as gainfully self-employed, you won't have to do any jobsearching provided you are self-employed for the required number of hours.

IQ

jorri

true, I'm basing this on the assumption i'll actually be making a reasonable income of course. i'd expect there will be dips in it even if i were. it might be less hassle than the current situation.