Universal Credit - are self-employed people eligible?

Working out what benefits you can claim while self-employed can be confusing. It's sometimes hard to tell what you’re entitled to, and how much you’ll get, especially as self-employed people’s earnings tend to fluctuate.

Universal Credit is a major change in the UK’s benefits system. Read on to find out whether you’re eligible, and how much you might get.

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What is Universal Credit?

Universal Credit is a payment made monthly (or twice a month for some people in Scotland) that is intended to help with living costs for people on low incomes and those who are out of work. It will replace six existing benefits, and is gradually being rolled out across the UK.

Once the rollout is complete, Universal Credit will replace:

• Child Tax Credit
• Housing Benefit
• Income Support
• Income-based Jobseeker’s Allowance
• Income-related Employment Support Allowance
• Working Tax Credit

Check to see whether Universal Credit is available in your area.

Who is eligible for Universal Credit?

You may be eligible for Universal Credit if:

• You’re on a low income or currently out of work
• You’re aged 18 or older
• Either you or your partner are below the qualifying age for the State Pension Credit
• You and your partner have combined savings of less than £16,000
• You live in the UK

Can self-employed people claim Universal Credit?

Universal Credit is also available to self-employed people, provided they meet the criteria set out above. However, the process for claiming Universal Credit, and the amount you may get, is different.

It’s important to understand that Universal Credit is only available to those who are deemed “gainfully self-employed”. This means that self-employment must be your main form of employment, and that you are receiving earnings from it. Your work must also be “organised, developed, and regular,” and must expect to turn a profit.

Self-employed people (including company directors, even if they pay themselves through PAYE) must report their earnings at the end of each assessment period, which is normally monthly. You also have to report your expenses each period, along with what the money was spent on, plus tax, National Insurance, and pension contributions.

If you are deemed to be gainfully self-employed, you won’t have to search for other jobs as you would otherwise. Instead, you can focus on building your business.

How much can self-employed people get in Universal Credit?

Self-employed people’s Universal Credit payments fluctuate with their income. The amount you get will also depend on other factors such as whether you’re in a couple or have children.

Your payments will be affected by something called the ‘minimum income floor’. Each month the DWP will look at your expected earnings, and how much you earned in reality. Your expected earnings are the minimum income floor, and this figure will play a role in determining your payments.

The minimum income floor only applies to those who are in the ‘all-work-related requirements group’, meaning those who are expected to either work or look for work. There are some exceptions. For example, the minimum income floor won’t apply if you:

• Have been assessed as having limited capability for work or work-related activities
• Look after a child under the age of three
• Are pregnant or have given birth within the previous 15 weeks
• Are caring for a person with severe disabilities
• Are in full-time education
• Are in the first 12 months of self-employment (known as the start-up period)
• Are temporarily too ill to be in gainful employment, and this is affecting your profits

If you earn more than your minimum income floor, your Universal Credit will be ratcheted down as your income rises - so the more you earn, the lower your payments will be.

However, if you earn less than the minimum income floor, your Universal Credit payment will be calculated as if you’d earned the minimum income floor amount - that is, your payment will not go up even if your earnings fall below the floor.

It’s not possible to say exactly how much a self-employed person’s Universal Credit payments will be in advance. However, to get a rough idea, you can use one of the benefits calculators listed here.

What if I’m newly self-employed?

If you’re in your first 12 months of self-employment, you may be eligible for a ‘start-up period’. During this period, which can last up to 12 months, the minimum income floor doesn’t apply. You can also benefit from guidance from a work coach to help you develop your business. You’ll need to meet with your work coach at least once a quarter, and you may need to provide evidence to prove that you’re still gainfully self-employed.

Have you received Universal Credit while self-employed? How was your experience? Let us know in the comments.