Universal Credit – Are You Self Employed?

If you are one of the thousands of people in the UK who are self employed, you may currently be topping up your self employed earnings with Working Tax Credit.

Working Tax Credit – Nice and Simple

The amount of your Working Tax Credit award is straight forward as its based on your earnings reported for Working Tax Credits which are based on actual figures for the previous year as well as the amount of hours you work (mainly as you must be working over 16 hours and also get a premium for working over 30 hours). Nice and simple.

The more you earn the less you get until you earn too much and your entitlement stops.

So as long as you earned money during the tax year, you were entitled to Working Tax Credits, so if you had no income for a couple of months (typical in seasonal businesses like hospitality), you could spend this time working on your business to make sure next holiday season you continue to make money in your business.

But Universal Credit is different

Universal Credit – Not So Simple

The amount of your Universal Credit award is now based on your earnings, there is no calculation based on hours worked just solely that you are making money from your self employment. Sounds simple right?

Now the big difference between Working Tax Credit and Universal Credit is the assessment period, where as Working Tax Credit were done on an annual basis the assessment period for Universal Credit is now monthly.

What does this means for the self employed!

Simple. Take a typical year, some months you make money, some months you are working on your business activities such as accounts, marketing, hr, promotion, etc all of which in a typical self employed business are unpaid. Well unpaid in that activity is unpaid, although some work such as marketing is done in the hope of future work and pay.

The DWP thinks this work is not actually work, let me explain.

As I mentioned above some businesses are seasonal, such as hospitality. Busy in the summer quiet in the winter, where winter is used to keep the business running, and promoting the business keeping the bookings coming for next summer. Under Working Tax Credit this was fine, as your overall yearly income was taken into account, with Universal Credit this is no longer the case.

Gainfully Employed?

In order to be classed as self employed, you must be assessed as being Gainfully Employed.

So under Universal Credit if you spend several months doing work directly inside your own business which you dont charge for, then you will be classed as not being Gainfully Employed! Put simply you will be classed as not working. So no matter how much time you spent on your business then according to the DWP you are not self employed or working, unless your business is actually making money. We all know this is not that straight forward in the world of self employment.

Not That Helpful for the Self Employment!!

So in a nut shell the new Universal Credit benefit is only set out to not help the self employment but to reduce the benefit budget. Whilst I appreciate that someone could pretend to be self employed just in order to not be told to look for paid work, but I think the DWP really needs to try to be more helpful to the self employed and the thousands of people striving for a better life.

I mean rather than asking how much money a business has made and stopping benefit based a businesses turnover, maybe they should be asking what can the DWP do to help your business make more money. While yes being aware of businesses that may never work or people that are just pulling the wool.

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