Universal Credit and a fluctuating 2nd hobby type income......

Ted76

Hi folks, thanks for anyone who takes the time to read this adventure below!!

I posted about this a few years ago but nothing actually came of the 2nd income.

That topic was closed but as years have passed I’m wondering is there any more clarity on it or changes that can help determine how I go about this. 

I’d just like to add that I’m the sort that have never owned a chipped box, so want to be legit but am worried that I’m gonna be crippled unfairly. 

Anyway…….I have a part-time, stable job that brings in the same money every month.  This is all done via works salaries and wages and helps work out monthly UC.  Myself and my wife apply jointly.  UC is broke down in to wage and we also get allowance for being a carer and also 2 children. 

I may be getting a 2nd income that fluctuates from month to month.  One month could earn nothing….another £100…….another £200……but taking these earning as actual income over the course of a year, it will be negligible income.

My issue is if I tell UC that I earned £200 - that will get taken off our monthly UC allowance.  But as I said, in real terms I won’t have actually earned £200 when expenses come in to play. So effectively I’ll be losing UC money for a hobby style 2nd income that on the face of it may be earning a few £££ but in real terms isn’t really!!

Again, I want to ensure I do everything correctly but I pulled the plug on the 2nd income a few years ago due to fear of losing money that we simply, as a family, can’t afford to use. The only reason I’m considering it again, is that it could ultimately pay off in a year or two and I could be earning considerable money that would then mean I wouldn’t need UC but my worry is in the interim or if it flatlines and I only truly earn a very small amount, if any - month to month. 

Hope that makes sense……and I really appreciate any advice, just like I did a few years ago.

Thanks 

Ted

zedonk

Is this second income self-employment? If so, you would report your income and expenses to UC every month, and they only take into account the profit. Then for every £1 profit you make, your UC reduces by (corrected) 55p, so you should still be better off. 

NedS

As stated above, as your side hobby is producing some income, you must declare it and would be treated as self-employed for this (not gainfully).

You would be required to report you income and expenses from that self-employment (hobby) each month. Your earnings are the income - expenses.

For example, if you make Widgets and sell them on eBay for £10 each, but eBay charge a 5% fee (50p) and it has cost you £5 in materials and shipping, then your earnings are your income - expenses, so £10 income - (£5 + 50p) expenses = £4.50 profit/earnings and this £4.50 profits are what would be taken into consideration when calculating your UC. If you make and sell 20 Widgets per month, your income is £200, expenses are £110, and earnings/profit is £90

Your UC will reduce by 55p in the pound (not 63p as stated above), so you will have an additional £90 income but £49.50 less UC, so overall you are better off by £40.50 per month. You will always be better off - the more Widgets you make and sell, the more better off you will be.

Ted76

That's great to have that confirmed, thanks so much.  I'm fine with that as I was originally fearful of my gross 2nd earnings just being taken off.

Now my next issue is what actually comes under "expenses"!!  If I'm away all day, does food etc., count - clothes - monthly fuel, cost of monthly lessons.......I really have no idea who could advise on this.  Presume same things would apply as expenses eligible for tax?

Also, if my expenses outweighed or equalled my income - do I still need to declare that on months that I've earned nothing?

Icequeen1

Ted76 said:

That's great to have that confirmed, thanks so much.  I'm fine with that as I was originally fearful of my gross 2nd earnings just being taken off.

Now my next issue is what actually comes under "expenses"!!  If I'm away all day, does food etc., count - clothes - monthly fuel, cost of monthly lessons.......I really have no idea who could advise on this.  Presume same things would apply as expenses eligible for tax?

Also, if my expenses outweighed or equalled my income - do I still need to declare that on months that I've earned nothing?

UC has its own expense rules, so just because it qualifies for tax doesn't necessarily mean it is accepted by UC but broadly if it is wholly and necessarily incurred in relation to your self-employment and isn't excessive then you can claim it. Clothes wouldn't usually count unless it is a specific uniform that is required. Fuel directly for business travel should be ok. 

What do you mean by monthly lessons? I would suggest you make a list and ask your work coach. 

For tax, if your gross (before you deduct expenses) is more than £1k over the year you will need to register as self-employed and fill in a tax return. 

Losses for UC can be declared, you would declare nil income from self-employment but any loss would sit on the system and could be offset against profit of the same business in a later month. 

Ted76

Thanks again for the great advice.

My tax is all processed via my accountant. 

RE: your latter point, that's really good to know that it can be offset.  If it is 0 profit or a loss, must it still be declared?  Seems a lot of additional work each month and sort of takes the joy out of the hobby income, shame it couldn't be processed somehow over a year - same as tax - instead of it hanging over and needing to be processed every month. 

Ted76

Also, how does legacy purchases work?  As you all know, if I purchased something in regards to my 2nd income, this can be tax deductable over the course of a year. 

But with UC, hypothetically, if I made a substantial purchase last year for my current 2nd income - does that have any relation to current UC declarations?

Spoonie_Turtle

Ted76 said:

Also, how does legacy purchases work?  As you all know, if I purchased something in regards to my 2nd income, this can be tax deductable over the course of a year. 

But with UC, hypothetically, if I made a substantial purchase last year for my current 2nd income - does that have any relation to current UC declarations?

No, UC works on cash-in-cash-out, income and expenses in the actual assessment period they occurred.

Ted76

Many thanks for clarifying. 

In the future, if I needed to buy equipment and it was paid off monthly then I hope/presume this would be an ongoing monthly expense?

poppy12345

zedonk said:

Then for every £1 profit you make, your UC reduces by (I think) 63p, so you should still be better off. 

The deductions are now 55p for every £1 of earnings. 

zedonk

NedS and Poppy, thank you for correcting my figure! I've amended my post above. 

OP, if you want to remain on UC then reporting your income and expenses each month is just something you have to do. Honestly, it takes about 10 minutes. If you made no profit or loss in the assessment period then you just enter 0 for everything and submit.