Universal Credits, Employed, and Starting a Business

cathyapple

Hi there I was hoping for some guidance. I currently receive Universal credit and work (employed) 16 hours a week as I have 2 young children. I have recently been looking at starting an online business working from home, perhaps an extra 3-4 hours a week in an evening when the kids are in bed, which would not offer a profit for a few months initially. I would be the sole director and it would be a limited company. Where would I stand with my Universal Credit, would I lose it, as this is not an option until by business is giving me a real profit in line, or greater, that the Universal Credit I receive now?

[Deleted User]

I'm not sure that a business working 3-4 hours a week which would not make a profit for months warrants becoming the sole director of a limited company, from which maybe/eventually you would complicate everything by paying yourself a dividend .

tomtom256

For Universal Credit purposes you would be employed and self employed. You would nee to declare the self-employment and then report the business income and expenditure at the end of every assessment period. Your award will then be calculated using the self-employed and PAYE earnigs subject to the normal earnings taper.

Ivywestpop

Someone else may be able to shed more light onto this, but I think you may be best registering as a sole trader - but this is only necessary if your profit is above a certain threshold (I think around £1200 for the tax year, so 7 more months). It may be worth just giving it a go and seeing how things progress - if you reach a profit, great! There are also some additional supports under UC for those starting a business (not too sure what they are as I don't claim this, but recall seeing something when I was looking into it). Good luck!

themorganator4

tomtom256 said:

For Universal Credit purposes you would be employed and self employed. You would nee to declare the self-employment and then report the business income and expenditure at the end of every assessment period. Your award will then be calculated using the self-employed and PAYE earnigs subject to the normal earnings taper.

This, although you may be subject to the minimum income floor (MIF) once this comes back in (currently suspended due to covid 19) although as you work employed for the majority of your wage, it is unlikely to be applied. 

Also if you are going to be a director, when declaring earnings, remember to only input your self employed earnings NOT your earnings paid via PAYE, otherwise they will come off twice, this includes earnings you pay yourself via PAYE

tomtom256

themorganator4 said:

This, although you may be subject to the minimum income floor (MIF) once this comes back in (currently suspended due to covid 19) although as you work employed for the majority of your wage, it is unlikely to be applied. 

Also if you are going to be a director, when declaring earnings, remember to only input your self employed earnings NOT your earnings paid via PAYE, otherwise they will come off twice, this includes earnings you pay yourself via PAYE

She would only get the MIF after 12 months, as it's a new business. so would be eligible for the start up period, however if working more PAYE, highly unlikely to be found gainfully self-employed.

Spoonie_Turtle

Ivywestpop said:

Someone else may be able to shed more light onto this, but I think you may be best registering as a sole trader - but this is only necessary if your profit is above a certain threshold (I think around £1200 for the tax year, so 7 more months). It may be worth just giving it a go and seeing how things progress - if you reach a profit, great! There are also some additional supports under UC for those starting a business (not too sure what they are as I don't claim this, but recall seeing something when I was looking into it). Good luck!

If they earn more than £1000 in a tax year (income, not profit) https://www.gov.uk/set-up-sole-trader