Will UC payments immediately increase upon submission of tax return with lower yearly income?

ColonelCabbage

As a self-employed person, my income for tax year 2022-23 was ~£20,000. For current year 2023-24, it’s only ~£9,500 so far (and unlikely to change much by Apr 2024 since there’s no work).

Based on tax year 2022-23 income of £20,000, UC are estimated by benefit calculators to be ~£115 per month, vs. £450 per month based on tax year 2023-24 income of £9,500.

If I claim now, I assume that UC payments will be £115 based on year 2022-23 £20,000 income. And if instead I wait a few months and claim in April 2024, UC payments will be £450 based on year 2023-24 £9,500 income.

Here’s my question:

If I claim now and start receiving £115 monthly payments (based on £20,000 income), what will happen when in April 2024 I submit my tax return and declare £9,500 income for tax year 2023-24? Will payments go from £115 to £450? If so, will it happen immediately? Or will they stay the same?

Spoonie_Turtle

ColonelCabbage said:

If I claim now, I assume that UC payments will be £115 based on year 2022-23 £20,000 income. And if instead I wait a few months and claim in April 2024, UC payments will be £450 based on year 2023-24 £9,500 income.

Here’s my question:

If I claim now and start receiving £115 monthly payments (based on £20,000 income), what will happen when in April 2024 I submit my tax return and declare £9,500 income for tax year 2023-24? Will payments go from £115 to £450? If so, will it happen immediately? Or will they stay the same?

No, UC payments are based on actual income received during each assessment period, worked out as income received minus expenses.  If income fluctuates, so will your UC entitlement each month.

So nothing will happen to your UC when you put a tax return in, as they are not at all related.

zedonk

Your past income is irrelevant (except as a guide to what you might expect to get). You have to log into the UC website once a month and enter your self-employment income, expenses and any tax paid to HMRC in the past month - all on a strictly cash basis. Then your UC for the month is calculated and you receive it 7 days later.

You'll need to make sure you keep good records for this. It's a bit fiddly as the reporting period starts on whatever day of the month you first claimed UC - so I have to provide the info for the 10th of one month through to the 9th of the next. 

I've been self-employed and on UC since 2020, so feel free to ask me any questions about how it works in practice. 🙂

ColonelCabbage

@Spoonie_Turtle and @zedonk thanks!

I just made my new UC claim. I was surprised to see that money-wise they only asked how much money I have on my bank account but not how much money I'm making... I don't get it. Why did they not ask how much money I earned within the last 30 days for example?

Also little digression: council tax support seems to still be working the old way, that is, based on past tax year income. This is bad because I had a much higher income last year than current year. I really need it now yet it seems I won't get it because the system will probably assume I'm earning the same now than last year isn't it?

poppy12345

Can't advise on the council tax reduction because all local Authorities have their own rules.

When you first claim UC they don't ask for your earnings in the past as it's irrelevant, as advised previosly  because UC entitlement is based on earnings received each monthly assessment period.

What they will ask at some point is your earnings for the past 9 months as this is related to the 9 months grace period for the benefits cap.

As you're self employed you will need to report your earnings and expense on the last day of each assessment period going forward.

ColonelCabbage

@poppy12345 "When you first claim UC they don't ask for your earnings in the past as it's irrelevant, as advised previosly  because UC entitlement is based on earnings received each monthly assessment period."

Not following you. What will the first UC payment be based on if not on what I earned in the month preceding my claim?

Spoonie_Turtle

ColonelCabbage said:

@poppy12345 "When you first claim UC they don't ask for your earnings in the past as it's irrelevant, as advised previosly  because UC entitlement is based on earnings received each monthly assessment period."

Not following you. What will the first UC payment be based on if not on what I earned in the month preceding my claim?

The earnings of your first month of your claim. 

At the end of the assessment period you report your earnings and expenses.  The difference between the two is your income for that monthly period and is used to calculate your UC payment.

ColonelCabbage

@Spoonie_Turtle makes sense. Well I'm going through the worst period ever (I work on upwork where none of my gig applications have been successful over the past couple of months). Chances are, I'll make 0 within the next 30 days. If I do report no income for my first assessment period, won't that create a problem? Like, rejecting my claim on the basis that I'm not truly self-employed or something. I mean making zero sounds quite weird I suppose.

poppy12345

If you're found to be gainfully self employed you'll have a start up period of 12 months, this will mean the minimum income floor will not apply to you during that time. See link. https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide/universal-credit-and-self-employment-quick-guide

If you have zero earnings during an assessment period then you'll receive your maximum UC entitlement. How much that will be will depend on your circumstances.

tomtom256

Have you told UC you are self-employed and have you attended a gateway intervention appointment? Thats the first step as they need to make a decision on whether they deem you to be gainfully self-employed. See https://www.gov.uk/self-employment-and-universal-credit

ColonelCabbage

Thanks guys.

@tomtom256 yes the gateway intervention appointment was booked 3 weeks after the day I made my claim.

One last thing: I understand arrears payments start five weeks following UC claim. Was it like that with tax credits? It seems to me that it was either paid in advance or the first post-claim payment was bigger, or something no? Maybe I'm wrong.