Self employment and benefits
If you or your partner are working, or
thinking of starting work, as a self employed person you might
qualify for welfare benefits to top up your income. The
benefits you are entitled to will depend on your age, the number of
hours you work each week, the amount of your earnings from work and
any other income, whether you have children, and whether you have a
disability or illness.
Applies to: England, Wales, Scotland and
You can read through this information sheet, or go directly to
the sections you want to read by clicking on these links:
If you or your partner are working, or thinking of starting
work, as a self employed person you might qualify for welfare
benefits to top up your income. The benefits you are entitled
to will depend on your age, the number of hours you work each week,
the amount of your earnings from work and any other income, whether
you have children, and whether you have a disability or
Benefits you might be entitled to when working in self
If you are self employed and have dependant children you might
be able to get: benefits:
We explain more about the benefits you might be entitled to when
working in self employment below.
If you usually work in self employment, but are not able to work
due to illness or disability, there are other benefits you might be
able to get. See Illness, Injury and
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Calculating hours of self employed work
The benefits you can get when working in self employment depend
on whether or not you are classed as working full or part time. The
number of hours you need to work to be classed as in full time work
is usually 16 or more hours a week. However, some people need to
work 30 or more hours to get Working Tax Credit
When deciding the number of hours you work as self employed the
benefit rules look at the hours you are working ‘in reasonable
expectation of payment’. This means that it is not only the hours
you spend doing your job but also any hours you must spend to make
sure you get work, get paid for the work you have done and keep
accounts and other records. You might spend time preparing
advertising to get work, taking bookings for jobs, sorting out
accounts, buying stock or materials etc. All of these activities
can count towards the hours you work.
If the number of hours you work varies there are special rules.
If your hours of work vary in a regular way, your hours are
averaged over the ‘cycle of work’. For example, if you work three
weeks on and one week off your cycle of work would be 4 weeks and
an average of hours over a four-week period would be
If you have a ‘cycle of work’ that lasts a year your hours are
averaged over the whole year. For example, if you usually
work 30 hours a week but there are 8 weeks during the year where
you do no work, add together the hours you work and divide by 52 to
work out your normal hours [30 hours x 44 weeks = 1320 hours
divided by 52 is 25 hours a week].
If you work during school term time only there are special rules for working out your hours of
If you are a seasonal worker and only work for part of the year
you are usually regarded as having a ‘cycle of work’ for that part
of the year when you are working and you should not be treated as
being in full-time work for the other part of the year. For
example, if you work hiring out deck chairs on a beach from May to
September your cycle of work will be May to September.
If you have no recognisable ‘cycle of work’, then the average of
hours over the five weeks prior to your claim for benefit is
It can be difficult to work out whether you will be classed as
in full time work especially if you only work for part of the year;
if in doubt seek advice. You can use our Find an Adviser tool to find a local
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Benefits if you are self employed full time
Whether you are classed as working full time depends on the
benefit you want to claim and the hours you work.
- If you work full time you might get Working Tax Credit if your income is low. You
will be working full time if you work 16 or 30 hours a week
dependant on your circumstances. You will be working full time for
Working Tax Credit if:
- You work at least 16 hours a week and have dependant children,
are disabled and are getting or were recently getting certain
benefits, are aged over 50 and you were getting certain benefits
when you started your business or you are aged at least 60
- You work at least 30 hours a week and are aged 25 or over
- You are a couple with children and your joint working hours are
at least 24 hours a week. If you both work, your joint weekly hours
must be at least 24, with one of you working at least 16 hours
a week. If only one of you works, that person must be working at
least 24 hours a week.
If you work full time you will not qualify for Income Support or Jobseeker's Allowance. For these benefits you
will be classed as working full time if you work for 16 hours or
more each week.
You can get Pension
Credit, Housing Benefit (HB
England, Scotland, Wales) (HB
Northern Ireland) and Council Tax
Support no matter how many hours you work.
The amount of benefit you can get will be affected by any
earnings, other income and capital you have. To work out how
much benefit you might get, use our Benefits Calculator.
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Benefits if you are self employed part time
Benefits you can get when working part time include Income Support if you are a person who
qualifies (e.g. a single parent) or Jobseeker's Allowance if you are looking for
work of more than 16 hours per week. The amount of those benefits
will be affected by any earnings you receive.
You can claim Pension Credit,
Housing Benefit (HB England, Scotland,
Wales) (HB Northern Ireland)
and Council Tax Support if you
work part time.
If you qualify for Income Support, Jobseeker’s Allowance or
Pension Credit you may be able to claim help with your mortgage or home loan
Your earnings, other income and capital affect the amount of
benefit you can get. To work out how much benefit you might get use
our Benefits Calculator.
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What to claim if you have less work than usual or no work
If there is a downturn in your business and you have less work
than usual or no work, you might be able to claim benefit or the
amount of your benefit might increase. If you have stopped working
in self employment and closed the business you will be unemployed
and might get Jobseeker’s
If you are still working full
time but your income has dropped, you might qualify for
Working Tax Credit for the first time
or the amount you get might increase.
The amount of Working Tax Credit you get is worked out using
your annual income. If the downturn in your business means
that your yearly income is likely to be less than the year before,
the amount of Working Tax Credit you qualify for could increase.
You should tell HM Revenue and Customs (HMRC)
(link opens in a new window) and they will work out if you
will get more Working Tax Credit.
If you have not stopped working, but have reduced your hours and
are working less than 16 hours a week you might get Jobseeker’s
Allowance. It can be difficult to get Jobseeker’s Allowance if you
have only temporarily reduced your hours. The rules for calculating hours of work could
mean that your average hours are worked out over a year. You might
be classed as working at least 16 hours even though you are
actually working less.
If you claim Jobseeker’s Allowance you will have to look for
full time work. This includes looking for work with other
employers not just self-employed work.
If you have a mortgage, it might be better for you to work less
than 16 hours and claim Jobseeker’s Allowance as Working Tax Credit
does not include help with mortgage payments. You will need to work
out which benefit you will be better off claiming. You can use our
Benefits Calculator to find out.
The rules are complicated and it can be difficult to know which
benefits to claim. If in doubt, seek advice from a benefits
adviser. You can use our Find an Adviser
tool to find a local one.
Your hours of work will not affect Pension Credit (if you are aged over state
pension credit age), Housing Benefit (HB England, Scotland, Wales) (HB Northern Ireland) and Council Tax Support.
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If you are working in the business, any business assets you have
(e.g. a work van, premises, or money in a bank account) are ignored
and do not affect the amount of benefit you can get.
If you have other capital or own other property that you do not
live in, its value could affect the amount of benefit
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Working out earnings from self employment
Your earnings from self employment will count as income when
working out how much, if any, benefit you will get.
For Working Tax Credit your earnings
are the taxable profits you made from self employment in a year.
This is the figure used on your tax return to work out how much tax
you have to pay.
To work out your taxable profit, deduct allowable business
expenses from your annual turnover figure.
The Notes that accompany
the tax credit claim form (link opens in a new window PDF file
size 3,144 kb) explain more about working out taxable
Tax credit awards are worked out using the income you had in the
last tax year. If there is a change, for example you have less
work, and your income is likely to be lower in the current tax year
your award can be looked at again. You could qualify for more tax
credits if this happens.
For Income Support, Jobseeker’s Allowance, Housing Benefit
(HB England, Scotland,
Wales) (HB Northern Ireland)
and Council Tax Support, your earnings
will be the net profit you made in the last tax year. If it is not
possible or practical to use last year’s figure, for example, you
have only recently started working in the business or your income
is lower because of a change in the business, a different period
can be used. Your ‘net profit’ is worked out by taking the figure
for your earnings and making deductions for reasonable expenses,
tax, national insurance contributions, and half of any pension
If you work as a childminder, there is a special rule for
working out your earnings. One third of your gross earnings count
as income and then deductions are made for tax, national insurance
contributions, and half of any contribution to a pension.
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Frequently asked questions about benefits and self
1. I’m self employed, but struggling
to make the business pay. Is it better for me to claim
Jobseeker’s Allowance or Working Tax Credit?
It can be difficult to decide if you will be better off on
Jobseeker’s Allowance or Working Tax Credit.
You will need to find out how much you will get if you
claim each benefit. Our Benefit
Calculator will help you to work out how much you might
get for these benefits.
These are some points you might want to think about when
deciding which benefit is best for you:
- You must not be working or only be working part time to get
Jobseeker’s Allowance. Part-time work is employment you do
for less than 16 hours each week
- If you claim Jobseeker’s Allowance, you must agree to look for
and take other full-time work
- You must work full time to get Working Tax Credit. If you do
not have children living with you and do not have disabilities, you
may have to work at least 30 hours each week to qualify.
- If your hours of work vary through the year, you might be
treated as being in full-time work even when you are working less
than 16 hours. If the average number of hours over the year is over
16, you will not be able to get Jobseeker’s Allowance
- You will only get help with mortgage
payments if you work part time and get Jobseeker’s
We suggest you seek advice from a local benefits adviser to help
you decide which benefit to claim. You can use our Find an Adviser tool to find a local
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2. Can a self-employed person get any
help to pay the mortgage on their home?
You will only be able to get help to pay the mortgage interest
payments on your home if you are entitled to:
This is because help with housing costs is paid as part of these
benefits and cannot be claimed on its own.
There are work rules for Income Support, income-based
Jobseeker’s Allowance and income-related Employment and Support
Allowance. These mean that you cannot get these benefits if you
work full time – i.e. Work more than 16 hours or more per week. If
you work part time and your earnings, other income and capital are
low enough and you meet the other rules for these benefits, you
might be able to claim help with mortgage interest
If you or your partner is aged over state pension age for a
woman, you might be entitled to the guarantee element of Pension
Credit to top up your income. You may also be eligible to help with
mortgage payments if your earnings and other income are low enough.
There are no rules about working for Pension Credit. You can get it
if you work full or part time in self employment.
To find out whether you can get Income Support, income based
Jobseeker’s Allowance or Pension Credit when working in self
employment, see self employed people and benefits.
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3. Can a self-employed
person claim Housing Benefit and Council Tax
Yes, you can work in self employment and get Housing Benefit
(HB England, Scotland, Wales) (HB Northern Ireland) and Council Tax Support if your earnings and other
income are low enough.
Housing Benefit can be paid if you rent your home.
If you pay a mortgage or other loan for your home, see question
Council Tax Support is to help you pay your Council Tax
bill if you rent or own your home. There are no work rules for
Housing Benefit and Council Tax Support, so you can get it if you
work full or part time.
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4. What is self-employment
Self-employment credit was a payment of £50 per week made to
people who had been claiming Jobseeker’s
Allowance for 13 weeks or more before they started to work on a
The scheme is now closed and no one has been able to make a new
claim for self-employment credit since 31 March 2011. It has been
replaced by the New Enterprise Allowance – a programme is intended
to help unemployed people start a business through business
mentoring and a weekly allowance. You can claim it if you have been
claiming JSA for 26 weeks or more and live in England, Scotland or
If you take part in the New Enterprise Allowance scheme, you
will get access to a volunteer business mentor who will provide
guidance and support as you develop your business plan and through
the early months of trading. Once you show that you have a viable
business with potential for growth, you will be able to access
financial support. A weekly allowance paid at £65 a week for the
first 13 weeks and £33 a week for a further 13 weeks will be
There is also the chance to apply for a loan of up to £1,000 to
help with business start-up costs.
See the GOV.UK website for
more information on the New Enterprise Allowance.
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5. I am self employed and my wife is
about to have our first child. Can I claim paternity
No. The main paternity benefit is Statutory Paternity Pay. This is paid by an
employer to an employee who meets the qualifying conditions, to
cover a period of leave for a birth or an adoption. If you are
working as a self-employed person, you will not be an employee and
you do not have an employer to pay you benefit.
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Last updated: 1 April 2013