universal credit for a 1 person ltd company owner director, employing partner

seatbeltnoob

Hi


I have a ltd company which is esentially my self employed business, vat registered.


I employ my wife to do administration work for the business, I pay her £500 a month to be on the phone, deal with emails, bookkeeping and some PA stuff.



I expect the DWP to treat the entire business income as my income (less the PAYE to my wife/employee).



I read that if I am self employed, then we both as a couple have a combined minimum income floor (MIF) but I haven't been able to get information as to how a couple's MIF is calculated.


Also, we have a 1 year old toddler, is she exempt from MIF or are we both exempt from MIF as we have a child less than 3 years old.

calcotti

Because of the child one of you can be designated as the primary carer and that person is not subject to all work related activity and is therefore excempt from the MIF.

The MIF for you, assuming that your wife is the designated carer and that you have nothing that limits your ability to work, is 35 x NMW/week (x 52/12 to calculate the monthly amount). Currently I calculate this to be £1,245.18/month. Obviously it will rise when the NMW rises later this year.

There's information her https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide/universal-credit-and-self-employment-quick-guide
and
https://www.citizensadvice.org.uk/benefits/universal-credit/on-universal-credit/how-the-minimum-income-floor-works-if-youre-self-employed/
and
https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/minimum-income-floor/

The internal DWP guidance on calculating self employed earnings can be found here
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/787442/admh4.pdf

You will be required to submit monthly information on your business income and expenditure on a 'cash accounting' basis. The difference is your earnings for the month. Assuming your wife is on PAYE the money you pay her will be an expense but the money she receives will count as her earnings for the UC calculation.

If you have been self employed for less than 12 months the MIF will not be applied until it is 12 months since you started.

Once your child is 3 your wife will come into the all related work activity group. However she is not self employed (assuming you have her as an employee) so a MIF does not apply to her. Her hours of work/work search will be less than 35 hours. More information here https://www.citizensadvice.org.uk/benefits/universal-credit/what-youll-need-to-do-on-universal-credit/claimant-commitment-what-group/. For a child aged 3 to 4 the expected hours are usually 16, once the child is 5 but below 13 the expected hours are usually 25 but these expectations can be amended depending on the particular circumstances regarding time to get to and from school etc.

The third link i have posted above includes a section explaining how the income of an partner is taken into account where a MIF applies. In effect, as I understand it, the rules mean that 1) if your wife earns above what would be her MIF, if she were subject to one, then your MIF will be reduced, or 2) if your wife earns less than this your MIF is effectively calculated as an individual.

seatbeltnoob

Thanks


This clarifies things for me, thank you for taking the time to put together the post. I hope others benefit from this too.


The minimum income floor is a real thorn for me. My work is quite seasonal. I have highs and lows, often the low months I'm working on marketing and doing work on websites which bring in customers. I won't have any receipts for that month but it the work pays off in Jan/Feb.


I guess I need to manage this buy extending credit lines for clients in November & October so payment hits my account later in december..

seatbeltnoob

I wanted to ask, does it matter if my wife is the applicant from UC or I am, or does it work it out to be the same in a roundabout way?

Icequeen99

seatbeltnoob wrote: »

Thanks


This clarifies things for me, thank you for taking the time to put together the post. I hope others benefit from this too.


The minimum income floor is a real thorn for me. My work is quite seasonal. I have highs and lows, often the low months I'm working on marketing and doing work on websites which bring in customers. I won't have any receipts for that month but it the work pays off in Jan/Feb.


I guess I need to manage this buy extending credit lines for clients in November & October so payment hits my account later in december..

Before making any decisions around payments - you might want to read up on something called the surplus earnings rules in UC. They don't impact many people at present due to the high disregard before they kick in but they will in future when the disregard is reduced.

IQ

calcotti

seatbeltnoob wrote: »

I wanted to ask, does it matter if my wife is the applicant from UC or I am, or does it work it out to be the same in a roundabout way?

You both have to make a claim. The first person will be asked if they are part of a couple, when they say yes they get a linking code. When the second party claims they are asked if they have a linking code, they enter the linking code and this joins the two claims so that the UC entitlement is worked out on a joint basis. Makes no difference who makes the initial claim.

More information https://www.citizensadvice.org.uk/benefits/universal-credit/claiming/starting-your-universal-credit-claim/

calcotti

Icequeen99 wrote: »

Before making any decisions around payments - you might want to read up on something called the surplus earnings rules in UC. They don't impact many people at present due to the high disregard before they kick in but they will in future when the disregard is reduced. IQ

This is the best explanation I know of https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/surplus-earnings-and-losses/

Still hard to follow! The monthly disregard is due to drop from £2,500 to £300 in April which, as you say, means there will be more claimants affected.

seatbeltnoob

Icequeen99 wrote: »

Before making any decisions around payments - you might want to read up on something called the surplus earnings rules in UC. They don't impact many people at present due to the high disregard before they kick in but they will in future when the disregard is reduced.

IQ

Yes I skimmed through that. will this help or hinder someone in my position? I don't know. If they can sculpt my high months into my low months then the negative impact of the MIF will be reduced I would have thought.

At the same time as introducing the surplus earnings rules, DWP introduced rules allowing self-employed claimants to carry forward any unused losses from earlier assessment periods. There is no time limit on carrying forward the losses (subject to some rules about breaks between claims). See the calculation of self-employed earnings page for more information.

What is a loss? When you actually make a loss in business, or when you've earned below the MIF. In that case it could help people smooth out the income for universal credit purposes?

tboo

seatbeltnoob wrote: »

Hi


I have a ltd company which is esentially my self employed business, vat registered.


I employ my wife to do administration work for the business, I pay her £500 a month to be on the phone, deal with emails, bookkeeping and some PA stuff.



I expect the DWP to treat the entire business income as my income (less the PAYE to my wife/employee).



I read that if I am self employed, then we both as a couple have a combined minimum income floor (MIF) but I haven't been able to get information as to how a couple's MIF is calculated.


Also, we have a 1 year old toddler, is she exempt from MIF or are we both exempt from MIF as we have a child less than 3 years old.

You are either a ltd company or self employed? Which is it?


If you are a ltd company then not sure if UC is the same as HB/CTR so they may

wish to know if you have shares each, pay dividends, have a directors loan account etc

seatbeltnoob

tboo wrote: »

You are either a ltd company or self employed? Which is it?


If you are a ltd company then not sure if UC is the same as HB/CTR so they may

wish to know if you have shares each, pay dividends, have a directors loan account etc

UC deem all owner directors of limited companies as self employed, and they treat the earnings of the ltd company as your earning (or your share of it).


If you are not sure how UC is treated it's best not to reply so authorativiely challenging a view.


Just annoying administration for me. Because I need to have 2 sets of accounts now as the allowable/dissalowed expenses are completely different for UC claims as they are for HMRC.


AFAIK they don't care about the DLA, shares etc. I wonder if the retained profit in the business counts towards the 16K savings threshold before UC becomes ineligible.

calcotti

tboo wrote: »

You are either a ltd company or self employed? Which is it?

As OP says, for UC purposes director of limited company is treated as if self employed and they have to provide details of all income and expenditure for the business on a monthly basis. The difference is taken as their earnings (or an appropriate portion if more than one director). UC have no interest in how such a person actually pays themselves, whether through a salary or dividends.