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.
During the coronavirus outbreak
The rule for self-employed people claiming Universal Credit were temporarily different because of the coronavirus pandemic. Since 31 July 2021 and the pre-pandemic rules have started to apply again.
This means that Universal Credit will check if you are gainfully self-employed. If so, your payment will be calculated using the Minimum Income Floor. You may be eligible for a start-up period. If you were in a start-up period on 13 March 2020 your start-up period will be extended.
Universal Credit: How much you’ll get
If you are 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 rules for the Minimum Income Floor were temporarily relaxed due to the coronavirus outbreak. Since 31 July 2021, the normal Minimum Income Floor rules have started to apply again.
If you already have a claim, Universal Credit will contact you about these changes before they happen.
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 if you are newly gainfully self-employed. 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
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.
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. The amount of earnings above the £2,500 threshold are the surplus earnings and will be taken into account in the next monthly assessment period. 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.