gainfully self-employed on UC or just self employed?

AG47

“If we decide it is, we may consider you ‘gainfully self-employed’. You’ll need to:

• report your self-employed income and expenses to us each month
• you won’t have to look for other work to receive Universal Credit

If we decide you’re not gainfully self-employed, you’ll need to:

• report your self-employed income and expenses to us each month
• look for and be available for other work, in order to continue to receive Universal Credit”

In your first year how is it decided if you are gainfully self-employed’and don’t need to attended work search interviews?

AG47

Universal Credit Self-employment guide
This guide is to help you understand what you need to do if you are self-employed and wish to claim Universal Credit.
This includes if you combine self-employment with other work, are a sub-contractor, or run your business through a company.
What you need to do if you are self-employed
If you are self-employed we may ask you to attend a ‘Gateway’ interview where we’ll decide if your self-employed work is:
• your main job
• developed, regular and organised
• expected to make a profit

If we decide it is, we may consider you ‘gainfully self-employed’. You’ll need to:

• report your self-employed income and expenses to us each month
• you won’t have to look for other work to receive Universal Credit

If we decide you’re not gainfully self-employed, you’ll need to:

• report your self-employed income and expenses to us each month
• look for and be available for other work, in order to continue to receive Universal Credit

To note:
If you are running your business through a company this is treated as self-employment in Universal Credit. This includes where you are a director and where you pay yourself through PAYE.
If you are a contractor or sub-contractor you may also be considered self-employed for Universal Credit purposes.
If these circumstances apply you will need to attend a Gateway interview to assess your entitlement before it is possible to award you Universal Credit.


What to bring to the interview

If you are asked to attend an interview you’ll need to bring evidence with you showing:

• your business name and address
• your Unique Taxpayer Reference (UTR) - HM Revenue & Customs (HMRC) sends this when you register for Self Assessment
• the date you started trading as self-employed
• the time you spend each week doing self-employed work
• your earnings from self-employment
• any marketing activities you’re undertaking
• anything else you’re currently doing to increase your earnings
• your VAT registration number if you’re registered for VAT

The types of evidence you can bring include:

• lists of customers and suppliers
• invoices, receipts and contracts
• transactions record or cash book
• trading accounts
• letters from HMRC
• bank statements
• payslips (if you work for someone else as well as being self-employed)
• marketing materials, such as business cards and flyers
• your business website address (if you have one)
• a portfolio of your work (for example, if you’re a photographer)
• a diary of business meetings or scheduled work
• a cash flow statement, including actual or forecast figures
• your business plan
• business certificates, such as insurance or professional accreditation certificates
Bring as many of these documents as possible. You can also bring any other evidence to support your claim.
If you don’t bring evidence showing the information listed above we may not be able to assess your entitlement and it may not be possible to award you Universal Credit.







Reporting your income and expenses
If you are self-employed you must report your earnings from self-employment every month. This is so we can calculate the amount of Universal Credit you receive each month.
You’ll need to keep a record of all payments made into or out of the business.

When to report
You must report your self-employed earnings on the last day of each assessment period, even if you have no income.
A ‘Report your income and expenses to-do’ will be posted on your Universal Credit account on the last day of each assessment period. You will also be sent a message via your preferred method of contact to remind you to report.
If you have no income in an assessment period you must report ‘no’ when asked if you have self-employed earnings.

Assessment periods are used to calculate your Universal Credit amount. The assessment period that applies for you will usually be calculated from the day you submit your claim, and will last for one month.

Important: If you don’t tell us your self-employed income each month your Universal Credit payment may be delayed or stopped.


How to report

You should report your income online by completing the ‘Report your income and expenses to-do’ on your account.

If you are not able to report online you can call 0800 328 5644 Monday to Friday, 8am to 6pm (closed on bank holidays).

What to report

Self-employed earnings are reported on a simple ‘cash in, cash out’ basis for Universal Credit.

You’ll need to keep a record of and report the payments received into and paid out of your business each assessment period. This includes:

• the total amount your business received
• how much your business spent on different types of expenses, such as travel costs, stock, equipment and tools, work clothing and office costs
• how much tax and National Insurance you paid
• any money you paid into a pension

You may be asked for receipts for any expenses you claim.

If you’re in a business partnership, you must report your share of the business income and expenses.

If you use a motorbike or scooter, or a vehicle that is adapted for business use (such as a van or a black-cab), you can report the actual amount of expenses you have incurred for your business for this, or tell us how many business miles you have travelled, in the assessment period.

If you use a car (including a mini-cab) you must tell us how many business miles you have travelled.

You cannot claim for travel to and from your ordinary place of business.
If you are running your business through a company that you own (including where you are a director) or receive any income from a company over which you have control you must report:
• all money received in by the business and all payments out of the business as your self-employed earnings each assessment period
If you pay yourself a salary using the PAYE system, you should report this as an expense when reporting self-employed earnings, so that this amount is not counted twice.
See Appendix 1 for details of how to work out your income, and the expenses you are allowed to include.
What may delay payment?
You won’t get paid until you’ve reported your income and expenses at the end of the assessment period. If you report late your payment may be delayed.

How your self-employed earnings are worked out

You earnings from self-employment are calculated as the total amount your business received in minus any payments you or your business paid out on the different types of permitted expenses, tax, National insurance and pension contributions each month.

These earnings will be taken into account as earned income for the purposes of calculating the amount of Universal Credit you receive.




Surplus earnings and losses

Your earnings or losses from one month can be taken into account when working out how much Universal Credit you receive in a later month.

If you earn more than £2,500 over the monthly amount you can earn before you receive no Universal Credit payment, you are said to have surplus earnings. This may reduce the amount of Universal Credit you receive in later months, or perhaps mean that you can’t get any Universal Credit payment in those months.

If you make a loss in one month, the loss will be stored and taken into account in months when you make a profit. If the profits are not high enough to fully cover a loss, the remaining loss will be carried forward to the next month when you make a profit. A loss will stop being taken into account once all your losses have been accounted for or your self-employed business ends.

If you are gainfully self-employed and subject to the Minimum Income Floor, that will still apply even if you make a loss. In months where you make a loss, your Universal Credit payment will be calculated based on your Minimum Income Floor.


Universal Credit and Tax
If you are self-employed and you claim Universal Credit you must keep records and report your income for tax purposes.
HM Revenue and Customs have simple rules for small businesses which most people receiving Universal Credit can use. These rules (the cash basis and simplified expenses) mean you can keep records for both tax and Universal Credit in a similar way.
For more information about keeping records for tax purposes, visit https://www.gov.uk/self-employed-records
You’ll need to register for Self Assessment and Class 2 National Insurance as soon as you can after starting your business. For more information visit https://www.gov.uk/log-in-file-self-assessment-tax-return


If you are gainfully self employed

If we decide you are gainfully self-employed:

• you won’t be required to look for other work to receive Universal Credit so that you can focus on running your business

• your Universal Credit payment may be calculated using an assumed level of minimum earnings - this is called a Minimum Income Floor
If you are not gainfully-self employed
If we decide you are not gainfully self-employed you will need to:
• depending on your circumstances, look for and be available for other work, in order to continue to receive Universal Credit
• report any self-employed earnings and expenses to us each month

The Minimum Income Floor will not apply and your earnings will be based on your actual earnings.
When the Minimum income Floor applies
A Minimum Income Floor will apply if you’d normally be expected to look for and be available for work to claim UC and are found gainfully self-employed but are not in a start-up period (more information on the start up period can be found on page 8).
How the minimum income floor is calculated
The Minimum Income Floor is based on what a person in employed work in similar circumstances to you could expect to earn at minimum wage.
It’s calculated by:
• the number of hours we’d expect you to look for and be available for work if you weren’t gainfully self-employed, multiplied by the National Minimum Wage for your age group
• it also includes a deduction for Income Tax and National Insurance
Your expected hours of work are set according to your individual circumstances. If you have caring responsibilities or a disability, your expected hours and Minimum Income Floor may be adjusted to reflect that.
Please note the level of your Minimum Income Floor will depend on your individual circumstances. Your work coach will tell you what your Minimum Income Floor level is.
How the Minimum Income Floor affects what you get
Universal Credit is designed to make sure that you’re better off in work, by topping up your earnings each month while you need it.

Each month the amount you receive is then calculated in part based on how much you earn. Where your earnings rise the amount of Universal Credit you receive can be reduced and where your earnings fall the amount of Universal Credit can rise.
The Minimum Income Floor works by setting a minimum amount you are treated as having earned each month. The level it is set at is the minimum amount used in the calculation of how much Universal Credit you receive each month. Where your actual earnings in a month are below your Minimum Income Floor your Minimum Income Floor is used to work out how much Universal Credit you get.

This means your Universal Credit payment will not rise to make up the difference when your actual income is below this level. You may want to find alternative ways to top up your income such as growing your earnings from your business or look for employed work in addition to your self-employment.

In months where your actual earnings are above the level of your Minimum Income Floor we’ll use your actual earnings to calculate how much Universal Credit you get.

Example:
Sarah is a 25 year old single gainfully self-employed electrician with no caring responsibilities or disabilities. She has housing costs of £500 each month. If she wasn’t gainfully self-employed she’d be expected to look for or be available for work for 35 hours per week at minimum wage in order to continue to claim Universal Credit.
Her Minimum Income Floor is set at £ £1091.06 per month. This means that she is treated as having earned £1091.06 as a minimum each month in calculating how much Universal Credit she receives.
In a month where she has actual earnings of £1000, as this is below her Minimum Income Floor, the amount of Universal Credit she receives is calculated using their Minimum Income Floor level of £1091.06.
In a month where they have actual earnings of £1100, as this is above her Minimum Income Floor, her actual earnings of £1100 are taken into account when calculating how much Universal Credit she receives.
More information about how Universal Credit is calculated is available here: https://www.understandinguniversalcredit.gov.uk/new-to-universal-credit/how-much-youll-get/
Changes to the Minimum Income Floor
The level of your Minimum Income Floor will increase in line with:
• the rate of the National Minimum or Living Wage rate applicable for your age and
• other changes to National Minimum or Living wage levels – these are currently uprated every year on April 1st
If you are the lead carer for a child under the age of 13 the level of your Minimum Income Floor will rise when:
• your youngest child reaches the age of five and
• when your youngest child reaches the age of 13
This is to reflect increases in the number of hours you’d normally be expected to look for and be available for work.
If you are self-employed while the lead carer of a child under the age of three you will not be considered to be gainfully self-employed but will need to have a Gateway interview when your youngest child turns three. If we decide that you are gainfully self-employed a Minimum Income floor may apply.
If you’re working as both self-employed and employed
Your Universal Credit payment will be worked out using your combined earnings or any applicable Minimum Income Floor, whichever is higher.
The start-up period – if you have been self-employed for less than a year
If you started your self-employment within a year before we decide you’re gainfully self-employed, and you are taking active steps to increase your earnings, you may qualify for a start-up period.
A start-up period can last for up to 12 months. During this period:
• you’ll receive support form a work coach who’s trained to work with the self-employed
• you won't have to look for or be available for other work so that you can focus on growing your new business
• a Minimum Income Floor will not be applied and the amount of Universal Credit you get will be calculated based on your actual earnings

If you qualify for the start-up period

You’ll have to come to quarterly interviews arranged with your work coach. At these interviews you’ll need to bring evidence to show that you are still:

• gainfully self employed
• taking steps to increase what you earn from self-employment

If you aren’t able to do this your start-up period could be ended. If you fail to attend a quarterly interview your start-up period may be ended and a sanction applied to your claim.
If you’re still gainfully self-employed when your start-up period ends you’ll have a Minimum Income Floor applied to the calculation of your UC award. Your work coach will tell you if you’re eligible for a start-up period.

AG47

You’re only entitled to one start-up period, unless it has been more than five years since your previous one, and you’ve started a completely different type of self-employment.
Reporting changes in your circumstances
You must report any change in circumstances which significantly affects your self-employed work, as soon as possible. For example if you:
• close or significantly reduce your business activity
• take a job as an employee as your main employment
• are no longer able to work
• take on new caring responsibilities such as caring for a severely disabled person or you become the lead carer for a child aged 2 or under
Depending on the change, your gainful self-employment and the level your Minimum Income Floor is set at may need to be looked at again.
If you close or significantly reduce your business activity you may need to attend an interview and be required to bring evidence to demonstrate this. If you had previously been found gainfully self-employed you will continue to be considered gainfully self-employed until this is done.
More information
For more information visit the Universal Credit website: https://www.gov.uk/universal-credit or call 0800 328 5644 Monday to Friday, 8am to 6pm (closed on bank holidays)
For support for your self-employed business, visit https://www.gov.uk/browse/business/setting-up
Appendix 1 – What you need to report

Business income and allowed expenses

Business income

You must report all payments you actually received during the assessment period, regardless of when it is earned.

This could include the following:

• any payments you actually received for goods and services. This can be by cash, cheque, credit or debit card, or bank transfer

• tips and gratuities

• any goods or services you received for work carried out. You must report what you would usually have charged if the customer had paid for the work you did

• Income Tax or National Insurance contribution refunds made that relate to your self-employed earnings

• any grants or subsidies you received if they are treated by HMRC as taxable income

You may be asked to provide invoices and receipts.

If you are VAT registered you can choose to include or exclude VAT in the earnings you report, as you can for Income Tax self-assessment.

If you include VAT, you must include any VAT you charged your clients and any refunds of VAT to the business received in your total receipts.

If you do not do this you must not include VAT paid to HMRC in your permitted expenses. You must be consistent with your choice of including or excluding VAT.


Payments out of the business

Permitted expenses

All permitted expenses must be reasonable. This means that they must be appropriate and necessary to the business, and not excessive.

Permitted expenses can include, for example:
• stock or raw materials
• equipment or tools, including purchase, hire or repair
• vehicle costs, for both acquisition and use of a motor-cycle or specially adapted business vehicles, such as vans, black cabs, and dual-control driving school vehicles. BUT if you use an un-adapted car (including a mini-cab) for business, you can only claim flat rate mileage (see below)
• other travel costs such as parking, tolls, congestion fees and public transport. BUT not travel between home and your regular place of work, or parking or other fines
• advertising or marketing costs
• administration costs, such as stationery or phone bills
• business premises, such as rent, heating, lighting, water charges, cleaning and business rates. BUT see below where the premises are also your home
• financing costs, such as up to a maximum of £41 for interest (not capital) on all combined business loans, accounting, legal, insurance and bank charges
• work clothing, for example uniforms or protective clothing. BUT not clothing that can also be used for everyday wear, such as a suit
• sundries
• employer costs, such as: employee’s wages or sub-contractor costs before any deductions, including wages payable to a partner, but not a business partner; employer’s contribution to an employee’s pension scheme; and employer’s secondary class 1 contributions
• payment in kind for work done for the business - the monetary value is allowed
• VAT paid to HMRC (if you report VAT inclusive earnings as explained above)
This is not a complete list.
If an expense is for both business and private use, you can only claim the share spent on business use. For example: if you work from home, you can only claim the share of costs related to that work (storage costs or time spent on call do not count); if you buy or rent a mobile phone, you can only claim the share of those costs, and cost of calls, for business use.

If you take out a loan or loans specifically for your business, you may deduct up to a maximum of £41 in each assessment period for interest repayments only.

You are not allowed to claim expenses for travel to and from your ordinary place of business.


Flat Rate deductions

Some payments out of the business must be reported as Flat Rate deductions. This includes all business expenses incurred for both acquisition and use of cars (including mini-cabs, but excluding dual control driving school vehicles), such as fuel, vehicle insurance, servicing, repairs, road tax, MOT etc. Some additional costs, such as mini-cab depot fees or radio hire, where these are separate charges to any vehicle charge, can be claimed in addition.

You can also choose to report some other payments as Flat Rate deductions, instead of separating personal and business costs. For example, where you incur expenses for a van or motorcycle, you only need to identify the number of business miles. Where you use your home for business purposes, there are also flat rate options that can be used.

More detail on the conditions and calculations that apply with regard to flat rate deductions are set out below.

Car, van or other motor vehicles

• If you use a car (including operating a mini-cab) for your business you must use only the following Flat Rate to report its running costs.

If you use a motorcycle, van or other motor vehicle designed mainly for business and not of a type commonly used for private use (such as a Black-cab), for your business you can choose either to:

• include the actual costs of buying and running it in your permitted expenses

• use the following flat rates

Flat rate for car, van or other motor vehicle:

• 45 pence per mile for the first 833 miles in the assessment period, and

• 25 pence per mile for every mile over 833 miles in the assessment period

Flat rate for motorcycle

• 24 pence per mile


If using flat rate, when reporting online by completing the ‘Report your income and expenses to-do’ on your account, you only need to enter the total business miles driven in each assessment period.


Using your home for your business

If you use part of your home for your self-employed business including, for example:

• providing services to a customer, for example as a hairdresser
• general business administration essential for the daily operation of the business, like:

o filing invoices, recording receipts and payments
o stock taking
o sales and marketing

You can deduct expenses for heating and lighting at the following flat rates for each assessment period:

• £10 for at least 25 hours, but no more than 50 hours;

• £18 for more than 50 hours, but no more than 100 hours;

• £26 for more than 100 hours

You are not allowed to offset using your home for:
• storage
• completing tax returns for HMRC
• self-reporting your earnings for Universal Credit
• being on call
• being available to carry out work

Personal use of business premises
If you live in a building primarily used for your business, such as a pub, you can claim some of the running costs as permitted expenses. The amount you can claim depends on how many people share the premises.
To work out how much you can claim you must add up the total costs that would be allowed as business expenses, solely for the running costs of the premises (such as rent, heating, lighting, water and business rates), if the premises were used solely for business. Then you must reduce that total by the following amounts in each assessment period:
• £350 for one person
• £500 for two people or
• £650 for more than two people
For example, Fred is a self-employed publican and lives in the pub. When reporting his income Fred says that he has expenses relating to the running costs of the premises of £800 in his most recent assessment period.

Fred shares his home with his civil partner, Andre. Andre is not involved in Fred’s business. Fred claims £800 in expenses for running costs of the premises (so excluding other expenses, such as costs of stock and staff wages) and reduces this amount by £500 as both he and Andre occupy the premises.

Other deductions

Income Tax

This is the amount of Income Tax you have actually paid to HMRC on your self-employed earnings during an assessment period.

You don’t need to estimate how much you owe for the month. If you haven’t actually paid any Income Tax in the assessment period, you should report £0.

National Insurance contributions

These are either Class 2 or Class 4 contributions for National Insurance that you have actually paid on your self-employment during an assessment period.

You don’t need to estimate how much you owe for the month. If you haven’t actually paid any National Insurance in the assessment period, you should report £0.

Pension contributions

These are paid into a registered pension scheme by or on behalf of a member of that scheme. They can be paid by an individual member, who must be a UK citizen, or by a third party for them.


Expenses not allowed to be deducted

You are not allowed to claim the following expenses:

• expenditure on non-depreciating assets, including property, shares,
or other assets held for investment

• any loss from a previous assessment period

• expenses for business entertainment

• capital repayments on a loan

• the purchase, lease or acquisition of a car (including a mini cab and taxi but not a black cab or Hackney Carriage)

• travel to and from your ordinary place of business

• parking or other fines

KatrinaWaves

Well done for answering your own question.

AG47

KatrinaWaves wrote: »

Well done for answering your own question.

The question remains.

Which is better? Gainfully self employed or the other type of self employment where you don’t have to attend the JC?

AG47

How is it decided if you are gainfully SF or the other type of SE?

Are there any number of hours or earnings that decide?