Self-Employed Tax Credits to Universal Credit

sleepyfrog

For 35+ years I have been self-employed without any issues. I claimed for tax credits when I became a single parent with 2 children, and I now have carers allowance for my autistic son when he turned 21. 

My self-employed jobs took a nosedive after covid, and I am lucky to make about £4k a year (although things are starting to improve slightly), but TC being calculated yearly from my tax returns wasn't a problem as it meant everything evened out. However, I now have to go to an interview as I have to change to UC. 

My issues are: 1) I make nowhere near the minimum national wage, 2) I cannot get a job as an employee as I have to be available 24/7 for my son (my SE jobs are home-based) and 3) I think the carers allowance means I cannot be 'gainfully self-employed'.

I am worried about the way UC is going to be calculated though: some months I might make £600, on a good month it could be £1500, and a lot of months I make less than £100. However - this last year I made £18 one month, but my outgoings were £600+ due to insurance/internet hosting renewals etc.

As I say - with TC it's all done yearly and 'all works out in the wash', but how is this going to work if I have to report all earnings monthly? I am assuming, given the way things are stacked against SE, if I make a loss they will calculate UC on a £0 income and my allowable deductions will be lost in the wind? :-/

Spoonie_Turtle

Point 3 is correct, as a carer you won't have the complication of the Minimum Income Floor.  So UC will simply be worked out each month based on your fluctuating income, which you'll have to report - actual income and expenses - each month.

I believe you can carry losses forward but will have to leave the detail for those who know more about self-employment on UC.

sleepyfrog

Thanks Spoonie_Turtle.

If losses can be carried forward that will be great. My worry is that instead of a regular monthly amount which I can use to budget with it is going to turn into months when I don't get anything and an end-of-year situation where they've either not paid me my full entitlement or I actually owe them money! I am a web designer/photographer and in theory could spend 2 months building a website and get paid for it at the end of month 3, and also have a photo shoot in month 3 to make my income above the MIF, with no other payments in between, and hence be penalised for a 'good' month.

I like working as it stops my brain liquifying but I will never be able to devote enough time to build my income up to the MIF, so it seems stupid to me that on UC I could be better off just jacking it all in and doing no work at all.

poppy12345

sleepyfrog said:

Thanks Spoonie_Turtle.

My worry is that instead of a regular monthly amount which I can use to budget with it is going to turn into months when I don't get anything and an end-of-year situation where they've either not paid me my full entitlement or I actually owe them money! 

That's one good thing about UC as apposed to Tax credits. Your UC entitlement will be based on earnings received each month, not annually like Tax credits was. Providing you report your earnings and expenses correctly, there shouldn't be any overpayment or underpayment. 

NedS

sleepyfrog said:

Thanks Spoonie_Turtle.

If losses can be carried forward that will be great. My worry is that instead of a regular monthly amount which I can use to budget with it is going to turn into months when I don't get anything and an end-of-year situation where they've either not paid me my full entitlement or I actually owe them money! I am a web designer/photographer and in theory could spend 2 months building a website and get paid for it at the end of month 3, and also have a photo shoot in month 3 to make my income above the MIF, with no other payments in between, and hence be penalised for a 'good' month.

I like working as it stops my brain liquifying but I will never be able to devote enough time to build my income up to the MIF, so it seems stupid to me that on UC I could be better off just jacking it all in and doing no work at all.

As you are a carer with Carers Allowance, the MIF will not apply to you - you will not be considered to be Gainfully Self-Employed.

You will simply be required to declare your income and expenses from self-employment each month, and the amount of UC you receive each month will be adjusted according to your earnings in that month. This is generally a good thing as you will receive more help in months where you need it if you've had less or no earnings, and less help in the months where you don't need it as much (i.e if you've had good earnings that month), which is a lot better than the old Tax Credits system where you received a regular monthly payment regardless of how much or little you may have earned, so UC mostly works better for people like yourself on fluctuating incomes.

sleepyfrog

Hi Poppy12345

From what I have just read, it will be worse than TC. If I have £200 income and £300 expenses, the £100 difference is not carried over to the next month, making my income for the year £100 more than it should be. 

I will have a minimum income floor, just not based on the national living wage. My UC MIF is going to be calculated based on an estimate for the year divided into 12. For this tax year ending, that would have been £333 per month. For 9 months I earned way, way below that - and 3 of those months were actually a significant loss. I would have not got anything extra to allow for the lower income. For the remaining 3 months, I earned well over that amount, meaning I would get hardly anything, if at all.

Their glib advice is to ask my customers to pay in installments and convert big expenses like insurance into monthly payments: the former is not possible when I provide services which are payable on delivery, and the latter means higher premiums and just more debt.

Doing the math if I am given any kind of MIF I will be significantly worse off on UC so I guess for the first time in 40 years I will be unemployed. I suppose on the bright side it'll be like an early retirement :-D

Spoonie_Turtle

sleepyfrog said:

 

I will have a minimum income floor, just not based on the national living wage. My UC MIF is going to be calculated based on an estimate for the year divided into 12. For this tax year ending, that would have been £333 per month. For 9 months I earned way, way below that - and 3 of those months were actually a significant loss. I would have not got anything extra to allow for the lower income. For the remaining 3 months, I earned well over that amount, meaning I would get hardly anything, if at all.

Where did you read that?  The MIF only applies to gainfully self-employed people, which as a carer you cannot be classed as. 

sleepyfrog said:

… so it seems stupid to me that on UC I could be better off just jacking it all in and doing no work at all.

You will always be better off earning more; yes UC will deduct more the more you earn but you still keep the additional value of 45% of what extra you earn. 
They deduct 55% of what you've earned from the UC payment, so a higher income still means you have 45% more money for the month in total.

poppy12345

sleepyfrog said:

Hi Poppy12345

From what I have just read, it will be worse than TC. If I have £200 income and £300 expenses, the £100 difference is not carried over to the next month, making my income for the year £100 more than it should be. 

I will have a minimum income floor, just not based on the national living wage. My UC MIF is going to be calculated based on an estimate for the year divided into 12. For this tax year ending, that would have been £333 per month. For 9 months I earned way, way below that - and 3 of those months were actually a significant loss. I would have not got anything extra to allow for the lower income. For the remaining 3 months, I earned well over that amount, meaning I would get hardly anything, if at all.

Their glib advice is to ask my customers to pay in installments and convert big expenses like insurance into monthly payments: the former is not possible when I provide services which are payable on delivery, and the latter means higher premiums and just more debt.

Doing the math if I am given any kind of MIF I will be significantly worse off on UC so I guess for the first time in 40 years I will be unemployed. I suppose on the bright side it'll be like an early retirement :-D

Not sure where you read that too but it's not correct for you.  I'd advise you to have another read of all of the advice you've been given here.