Self-Employed on Universal Credit quivery

lupiilu

I have two businesses. One is a sole trader and the other is a limited company.

My husband and I applied for Universal Credit and I applied as self-employed and have gotten on their self-employed scheme, which is a big relief.

I make a variable amount each month for my businesses, sometimes as little as £200 in a month, sometimes I make as much as £1,000. Most of my costs are fixed, with occasional bigger costs.

I'm an author. The way the businesses work are that I write under the sole trader and publish under the ltd. This means the income comes into the publisher first and then pays the author their share of the royalties.

I want to save as much money as possible for my businesses so that I can cover costs in those months where I earn less. Universal Credit ask about 'left over' and honestly, if I have my way, up until my first year as self-employed comes to an end, there won't be any, it'll all be invested in my company so that I can grow the publishing side to start looking at publishing boxsets with other authors in my genre.

So, two questions.

1. Does Universal Credit allow you to keep the money in the company to help it grow, or are they expecting that as time goes on, my income will grow and their obligation will diminish meaning all of the money not directly being used to cover that months costs is gone?

2. This is a blindside question, apologies. I'm due to get an inheritance next year of anywhere between £2,000 and £10,000. I want to invest this in the publishing ltd to get the legal and accounting side up and get the publishing side ready to go so that I can start recruiting authors for my first boxset. Will Universal Credit allow this, or will they expect me to use the money to live on until it's all gone?

I would be so appreciative of any answers. Thanks.

lupiilu

I honestly wrote 'query' in my title, and somehow its autocorrected to quivery. I'm so confused.

calcotti

On a monthly basis it is irrelevant what you do with the money. Your UC is based on the difference between your cash income and expenditure which you have to report every month. After the initial 12 months you will be treated as a minimum as earning minimum wage for 35 hours even if you have earned less.

Capital over £6000 is ignored. If you have capital over £6000 your monthly payments will reduce. Over £16,000 and up entitlement will end.

lupiilu

calcotti said:

On a monthly basis it is irrelevant what you do with the money. Your UC is based on the difference between your cash income and expenditure which you have to report every month. After the initial 12 months you will be treated as a minimum as earning minimum wage for 35 hours even if you have earned less.

Capital over £6000 is ignored. If you have capital over £6000 your monthly payments will reduce. Over £16,000 and up entitlement will end.

So, the money I invest in my business is considered an expense?

Thanks so much for the Capital information, I did not know that.

calcotti

lupiilu said:

So, the money I invest in my business is considered an expense?

No. Expenses are money you spend in connection from your business.

Lots of information here
https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide

ader42

lupiilu said:

I have two businesses. One is a sole trader and the other is a limited company.

The way the businesses work are that I write under the sole trader and publish under the ltd. This means the income comes into the publisher first and then pays the author their share of the royalties.

Some income you get as a sole trader? 
Some income you get as an employee or director of the Ltd Co.?

https://www.entitledto.co.uk/help/company-directors-and-self-employment

For the Ltd Co. :

"To calculate Universal Credit, all the money that comes in to your business is treated as your income"

"Similarly, all expenses that come out of the business are treated as your expenses for working out your profits"

"Any salary or dividend that you pay yourself is ignored"

huckster

Nothing stopping you investing the inheritance you mentioned in your business.  I think you would be best to declare it ,if over £6000, so a decision maker could consider whether your actions were reasonable.  By deciding to move the money to a business, you would be transferring money that could have been used towards living expense, so you did not need to claim benefits.  The decision maker would review whether these actions were reasonable.

You might want to speak to your accountant about the issues you raise.  Are you paying yourself a variable monthly  wage as an employee of the limited company ?  If not, would this be worth doing ?

tifo

UC treat directors of a limited company the same as self employed, if you own 100% of the company then all the income after expenses will be treated as yours. If you own 50% then half the money is treated as yours.

For example, in a particular assessment period you made £500 self employed with £100 expenses and the company made £1,000 with £200 expenses, your income in that month is £500 - £100 = £400 plus £1,000 - £200 = £800 so £1,200 in total for the assessment period.

calcotti

tifo said:

UC treat directors of a limited company the same as self employed, if you own 100% of the company then all the income after expenses will be treated as yours. If you own 50% then half the money is treated as yours.

For example, in a particular assessment period you made £500 self employed with £100 expenses and the company made £1,000 with £200 expenses, your income in that month is £500 - £100 = £400 plus £1,000 - £200 = £800 so £1,200 in total for the assessment period.

And if a salary is being paid from the company the salary will be counted as employed earnings  as reported through PAYE but the salary and associated NI have to be shown as an expense when reporting the company income and expenditure.

seatbeltnoob

Depends what OP defines as investment. If you just wack a balance into your business bank account to spend on the business in future. Sort of a directors loan to the limited company, or buying shares in your ltd company. That is not an investment under UC - it is under normal accounting purposes. UC only cares about money you actually spend.

E.g. if you received 5 grand from inheritance and you spent that 5 grand on self publishing your book - then that would be an expense (investment in your business).

tifo

UC doesn't run like HMRC rules, it's concerned with monthly turnover and expenses leaving total as income.