Employed + Self Employed + UC

Kayalana99

Hi Guys,

I just wondered if anyone knew how UC work out income etc for self-employment and how it affects?

Currently I am classed as being on the 35 hour mark as I work 20 hours + 15 hours study (OU) so I'm assuming this minimum floor income wouldn't apply to me as long as nothing changes.

However, it seems to want you to put your income on a monthly roll which is difficult to really work out self-employed esp when my accountant (used to when I did it before) seemed to knock a thousand or so off my tax bill through means I didn't consider (i.e adding in petrol costs / room in the house etc...his own costs) although perhaps I could get more clued up anyway..

Essentially, I would need around 4k to start my business which would then need to be paid back, so in essence would I be able to earn my first 4k without this affecting my tax credits? Is it only when the business makes an actual profit? Or if I start getting in 400 a month would I have to do something like 300 of that towards the loan and declare 100 as profit etc?

I just don't really understand how the best way to go about this on a month to month basis I guess.

calcotti

My understanding is that for self employment your 'earnings' for the month are worked out on a cash basis. You have to provide details of all the income you have received in connection with your business during the relevant assessment period and details of everything you have spent in connection with the business. The difference is your earnings figure for UC purposes. Any allowances etc that may be relevant to help reduce a tax liability have nothing to do with UC. When you actually pay your tax or NI this is expenditure which you would include in the information you provide UC.

Hopefully your work coach can help explain exactly what you need to provide.

For business loan repayments you are allowed to treat a maximum £41/month of interest as an expense, the repayment of capital is not taken into account as an expense.

Your penultimate paragraph refers to tax credits - if you are on Uc you will not be getting tax credits.

annandale

Yes. You have to report income and expenses monthly online. I’m employed and self employed and on UC. The self employed job isn’t my main job. I was showing a loss for the first 3 months as there was a delay in paying me for the business I invoice. So I reported the expenses and now that I’ve been paid for one invoice I’ll report the earnings. You report on the last day of your assessment period. The dwp have set guidelines as to what can and can’t be counted as an expense. For example I was told they very rarely allow taxi fares to be counted. It has to be reported on the last day of your assessment period each month, there is no way around that.

annandale

There’s a short online form asking you to give certain information when you report and they can call you in randomly to check your receipts/financial records etc.

calcotti

Thanks annandale - very helpful to have a post from someone who is actually doing it.

OP. You also asked about the Minimum Income Floor. I would expect this to be applied after 12 months if you are being treated as self employed. If DWP are allowing you 15 hours of study and only expect you to work 20 hours then the monthly MIF would be based on 20 x NMW x 52/12. You would be assumed to earn this even if you earn less, if you earn more your actual earnings are used. It’s a very blunt instrument which doesn't take Into account how self employed earnings can fluctuate. The result is that self employed and employed claimants with the same total annual income can get quite different levels of support.

See https://www.citizensadvice.org.uk/benefits/universal-credit/on-universal-credit/how-the-minimum-income-floor-works-if-youre-self-employed/
https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide/universal-credit-and-self-employment-quick-guide#the-minimum-income-floor

annandale

I think the OP would also need to get advice on the minimum income floor as well. In my situation I earn more from my other job than I do my self employed so MIF doesn’t apply to me. It is something you need to discuss with your work coach. Because if you made more from your self employment than your paid work they then might apply MIF to you after a year. My self employment earnings rarely change so unless I lost my other job it’s never going to be counted as my main job for DWP purposes.

calcotti

Yes, I wasn’t clear in opening post whether the 20 hours work referred to is the self employed work or whether it is employed work and any self employment is over and above the 35 hours detailed. If the former I would expect MIF to apply after 12 months, if the latter I wouldn't.

Kayalana99

Sorry yes the 20 hours is my employed job which I would not be giving up then 15 hours study. I doubt I would make more self-employed but there is a chance it would overtake or at least around about 'match' my employed income in year 2.

It's a shame I still feel a bit clueless about this expenses....as it feels like you guys are saying if I spend 4k in one month - this doesn't get counted in month 2 if I have 800 income come in. Also pretty much no overheads to this business which is great - it's just the set up cost and then perhaps 50 odd quid on mobile/insurance/travel etc.

There wouldn't be a loan repayment as such as the money is coming from a few places (although one part is a loan repayment I suppose)

calcotti

Kayalana99 wrote: »

Sorry yes the 20 hours is my employed job which I would not be giving up then 15 hours study. I doubt I would make more self-employed but there is a chance it would overtake or at least around about 'match' my employed income in year 2.

It's a shame I still feel a bit clueless about this expenses....as it feels like you guys are saying if I spend 4k in one month - this doesn't get counted in month 2 if I have 800 income come in. Also pretty much no overheads to this business which is great - it's just the set up cost and then perhaps 50 odd quid on mobile/insurance/travel etc.

There wouldn't be a loan repayment as such as the money is coming from a few places (although one part is a loan repayment I suppose)

That’s clearer. You shouldn’t have to worry about MIF. Even if your self employed earnings exceed your employed earnings it is arguable that you should not have the MIF applied if the time is spend on self employment is much less than that spent in employment. May be irrelevant at that stage anyway because combined earnings could reduce your UC entitlement to nil in any case.

There is provision to carry forward losses to later assessment periods. See towards the end of this https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/surplus-earnings-and-losses/
and https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/calculating-income-from-self-employment

Kayalana99

It's really not straight forward I guess but I'll have a read through.

Also another thought hit me if I earn 100 and have to pay 20% in tax, it's another expense that is going to bite me as it means straight away out of the 100 I've earned, I only see 80, but UC will take 63 off that leaving me with 17 per 100 earned.

I suppose one month I will be paying the tax bill, but most my income will be earned Summer time...so I'd have to be picky about the month I pay it I suppose...

calcotti

My understanding is
In the month you earn £100, UC will deduct £63 from the amount payable. When you pay your tax bill that counts as an expense in that assessment period. For self employed people who are subject to MIF it makes sense to pay tax in instalments because otherwise paying it in one go may the thing that brings them below the MIF and they then lose out through having it applied.