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Self employment and benefits - How will Universal Credit affect me?

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 a number of things, including your age, the number of hours you work and how much you earn.

How will Universal Credit affect me?

Anyone who needs to make a new claim for income related benefits will now have to claim Universal Credit.

Universal Credit is replacing the following benefits:

Some of the main issues for self employed people include:

Face-to-face interviews

When you make a claim for Universal Credit you will have to attend a face-to-face interview. You will need to show that your self-employment is organised, developed and carried out regularly in expectation of profit. It must also be your main form of employment. If you cannot demonstrate these things, you will need to agree to look for and be available for other work in order to claim Universal Credit.

Minimum income floor

When you are self-employed and you claim Universal Credit, you are treated as if you are earning a certain amount. This amount is called the 'minimum income floor'. If the minimum income floor applies to you and you earn below this level in any month, you are treated as earning the minimum income floor. If you are earning more than the minimum income floor, your actual earnings are taken into account instead.

The minimum income floor is the equivalent of someone working full time (35 hours per week unless you have other responsibilities) on the National Minimum Wage for your age group. Your minimum income floor will be set according to how much work you would be expected to do according to your circumstances.

Example: John is a self-employed taxi driver aged 35. He has a slow month and only earns  £800. His minimum income floor is £8.21 (National Minimum Wage for 25+ year olds) x 35 (hours per week) x 52 (weeks) ÷ 12 (months) = £1245.18 per month. This amount would be used to determine his Universal Credit payment for that month, rather than his actual earnings of £800.

Another example: Sally is a self-employed hairdresser aged 24. In her claimant commitment, she has agreed that she can work a maximum of 20 hours per week because she has to look after her son before and after school. She has a good month and earns £700. Her minimum income floor is £7.70 (National Minimum Wage for 21-24 year olds) x 20 (hours per week) x 52 (weeks) ÷ 12 months = £667.33 per month. Sally's Universal Credit payment that month would be calculated using her actual earnings of £700 rather than her minimum income floor. 

If you start a business whilst you are claiming Universal Credit, the minimum income floor will not apply to you for the first 12 months. This 'start up period' gives you a chance to grow your business. In the start up period, your Universal Credit payment is calculated based on your actual earnings even if they are lower than your minimum income floor. 

You get a 12 month start up period for the first 12 months of your Universal Credit claim if you started your business less than one year before you started your claim. You can only have one start up period for each business and you can only have one start up period in every five years.

Monthly reporting

If you are self employed you will have to supply monthly 'cash-in and cash-out' figures to the Department for Work and Pensions (DWP). If you fail to supply these figures between 7 days before and 14 days after each month, your Universal Credit payment will be suspended.

If you earn enough in a month to mean you don't have any entitlement to Universal Credit your claim will close and you will need to re-claim Universal Credit.

See our Universal Credit Benefit Guide for more details about Universal Credit.


Updated: April 2019

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