Does Housing benefits account for debt repayments?

Caci_2

I have started as a self employed web developer. And I could very easily earn £1000 in any of the coming months. But I will hardly have any profit off this income to cover rent.

I have defaulted accounts amounting to £1400 and I am constantly getting letters from collection agents so I plan to start paying it back. I also plan to take out credit for £3000 for tools [Mac and PC]. My current computer will not be able to support the kind of work that I am doing. So I will have payments amounting to £445 to cover debts and credit repayments. I also have phone and broadband contracts which amount to £90 per month. I think I should also count £300 for the living costs.

I have used an online calculator and it looks like if I earn over £1000 per month I will not be eligible for housing benefits. Does Housing benefits account for debt repayments?

missbiggles1

Fortunately not.

Caci_2

missbiggles1 wrote: »

Fortunately not.

Why is this fortunate?

If my business is not generating profit then clearly I have no income.

WillowCat

I think for a start you need to speak to an accountant or experienced book keeper about the structure of your business (sole trader/ltd company) and what allowable expenses may be offset against your receipts of income.

Then you need to understand that housing benefit has slightly different rules on allowable expenses (you cannot offset the capital of purchase of new equipment for example, though repair/replacement is allowed. It may be debatable whether your new pc/mac equipment would fall under replacement or 'new' if the specification is enhanced compared to your existing equipment).

You certainly cannot offset your personal debt repayments against your income, nor can you offset your living expenses. You may be able to offset a proportion of your line rental/broadband costs and gas/electricity. I think you cannot offset any allowance for your rent against your HB claim though you can for taxation purposes.

Once you know what your expenses are you can calculate your expected profit. Your profit will almost certainly be a high percentage of the £1,000 income. This is the sum you would use to pay your rent, debt repayments and other living expenses.

pmlindyloo

Caci wrote: »

I have started as a self employed web developer. And I could very easily earn £1000 in any of the coming months. But I will hardly have any profit off this income to cover rent.

I have defaulted accounts amounting to £1400 and I am constantly getting letters from collection agents so I plan to start paying it back. I also plan to take out credit for £3000 for tools [Mac and PC]. My current computer will not be able to support the kind of work that I am doing. So I will have payments amounting to £445 to cover debts and credit repayments. I also have phone and broadband contracts which amount to £90 per month. I think I should also count £300 for the living costs.

I have used an online calculator and it looks like if I earn over £1000 per month I will not be eligible for housing benefits. Does Housing benefits account for debt repayments?

Do you mean you are earning £1000 a month after business expenses?

I suggest you get some advice from an accountant or do some research as you seem muddled about what you can claim as business expenses (computer/telephone/internet etc).

If you are getting £1000 a month after business expenses the for HB purposes this is the income that will be used. No account is made for living expenses, debts. It is based solely on income.

Have you registered as self employed or a limited company?

Get some advice.

Caz3121

your expenses may result in you paying less tax but housing benefit do not allow the same deductions as HMRC do for tax
£1000 per month sounds low for a web developer and as you are just starting it may be worth to look for second hand mac and PC until you are sure it is a viable business at which point you could use the money from the business rather than taking a higher amount of debt

fishybusiness

There is a 'get out' as far as HB is concerned. Run as a ltd and make sure you are an employee.

Set up your RTI, or have an accountant do it for you, pay yourself what you can, based on true business profit and give all of the details to the LA.

Deal with your business expenses through your company legitimately, as HMRC allow.

Caci_2

Supposing my profit is £1000 and I present my bank statement to the housing benefits office. And it clearly shows that I am making various payments to various loan, credit and debt collection agencies amounting to £445. And it also shows that I am paying out an amount of £90 for phone bills and broadband. Stationary and repairs for £90 and 225 spent on living expenses, with a remainder of just £150.

The housing benefits office must therefore say that I make £1000 profit from my business and I am not entitled. Meaning I have to cancel my loan/debt repayments?

Caci_2

pmlindyloo wrote: »

Do you mean you are earning £1000 a month after business expenses?

I suggest you get some advice from an accountant or do some research as you seem muddled about what you can claim as business expenses (computer/telephone/internet etc).

If you are getting £1000 a month after business expenses the for HB purposes this is the income that will be used. No account is made for living expenses, debts. It is based solely on income.

Have you registered as self employed or a limited company?

Get some advice.

For my business income to improve I have to purchase a Mac and a PC. This will cost me about £3000. This will replace my current slow second hand computer. If I take out credit for £3000 I will have to make a monthly repayment of £200. Would I have to take this off my business profit?

Ames

You might not get a loan for 3000 if you've already defaulted on previous debts. If you're getting letters from debt collection agencies then your credit rating is already shot.

As for housing benefit, they'll look at your income and rent, and that's it. They don't look at debt repayments, or bills. The £445 could be spent on packets of marshmallows for all they care, it's personal spending and comes out of your income.

If you can't afford to pay the debts then you'd have to come to an arrangement with your creditors. They won't take kindly to you taking out further debt when you couldn't afford to pay them though and could decide to take you to court.


ETA: Your income being your profit, which is complicated. It still won't take into account the debt you're currently paying off though.

pmlindyloo

Caci wrote: »

Supposing my profit is £1000 and I present my bank statement to the housing benefits office. And it clearly shows that I am making various payments to various loan, credit and debt collection agencies amounting to £445. And it also shows that I am paying out an amount of £90 for phone bills and broadband. Stationary and repairs for £90 and 225 spent on living expenses, with a remainder of just £150.

The housing benefits office must therefore say that I make £1000 profit from my business and I am not entitled. Meaning I have to cancel my loan/debt repayments?

The way HB is assessed for self employed people is completely different to those who are employees.

Most councils will ask you to complete a special form like this, for example.

https://www.thanet.gov.uk/media/74137/BCT_Self-employed_Income_une13.pd

I am concerned that you do not understand the basics of your self employment and how you should be completing your accounts.