New to Universal Credit

11. Self-employment

If you are self-employed, Universal Credit will provide support to help you grow your business.

To get this support you will need to be able to show that:

  • self-employment is your main job or your main source of income
  • you get regular work from self-employment
  • your work is organised – this means you have invoices and receipts, or accounts
  • you expect to make a profit

If you can show all these things you will be considered to be ‘gainfully self-employed’. If you can’t show all these things you might have to look for other work if you are to keep receiving Universal Credit.

New claimants do not need to attend the jobcentre to demonstrate gainful self-employment during the coronavirus outbreak, but may need to take part in a telephone interview.

How much you’ll get

If you are regarded as being gainfully self-employed whilst claiming Universal Credit you will not be expected to look, or be available, for other work. This will help you to concentrate on making your business a success.

However, it will be assumed that you are earning the same amount as someone like you who is in paid work. This will usually be what someone of your age would earn if they worked at the National Minimum Wage for the number of hours that you are expected to work or look for work. This amount is called the Minimum Income Floor.

The Minimum Income Floor has been temporarily relaxed during the coronavirus outbreak. This change applies to all Universal Credit claimants and will last for the duration of the outbreak.

If you earn less than the Minimum Income Floor, Universal Credit will not make up the difference. You may need to look for additional work to top up your income.

If you earn more than the Minimum Income Floor, your Universal Credit payment will be based on your actual earnings.

The Minimum Income Floor will not be applied for up to 12 months after you start self-employment. This is known as a start up period, and during it you won’t need to look, or be available, for other work. But you will need to show that you are taking steps to build your business and increase your earnings when you talk to your work coach.

You must report any earnings from self-employment to the Department for Work and Pensions every month.

For more information see Universal Credit for the self-employed

Business assets

If you are gainfully self-employed your business assets will not be taken into account when you make a Universal Credit claim. Nor will they be considered when we work out how much Universal Credit you are entitled to. Business assets include things like machinery, premises and cash held in your business account.

Self-Employment Income Support Scheme

The Self-Employment Income Support Scheme (SEISS) is supporting self-employed individuals (including members of partnerships) whose income has been negatively impacted by coronavirus. Read more about eligibility for SEISS

The scheme is now closed to new claims for the first grant.

If you were eligible for the first grant and can confirm to HMRC that your business has been adversely affected on or after 14 July 2020, you’ll be able to make a claim for a second and final grant from 17 August 2020. You can make a claim for the second grant if you’re eligible, even if you didn’t make a claim for the first grant.

The scheme allows you to claim a second and final taxable grant worth 70% of your average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £6,570 in total.

As with the first grant, HMRC will contact you if you’re eligible. They will work out your eligibility for the second grant in the same way as the first grant.

If you have not been contacted by HMRC and believe you may be eligible for SEISS, you can check if you can make a SEISS claim

SEISS is treated as earnings in Universal Credit. Your Universal Credit payment will adjust in response to changes in your earnings.

If you need financial help whilst waiting for SEISS, check your eligibility for Universal Credit

Surplus earnings and losses

If you are self-employed and claiming Universal Credit, earnings or losses from one month can be taken into account when working out how much Universal Credit you receive in a later month.

If you earn more than £2,500 over the monthly amount you can earn before you receive no Universal Credit payment, you are said to have surplus earnings. This may reduce the amount of Universal Credit you receive in later months, or perhaps mean that you can’t get any Universal Credit payment in those months.

If you make a loss in one month, the loss will be stored and taken into account in months when you make a profit. If the profits are not high enough to fully cover a loss, the remaining loss will be carried forward to the next month when you make a profit. A loss will stop being taken into account once all your losses have been accounted for or your self-employed business ends.

If you are gainfully self-employed and subject to the Minimum Income Floor, that will still apply even if you make a loss. In months where you make a loss, your Universal Credit payment will be calculated based on your Minimum Income Floor.