Self employment and benefits - Universal Credit and self employment
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.
- Last reviewed 18 September 2023
Universal Credit and self employment
Self-employed people can get Universal Credit if their income and capital are low enough.
Some of the main issues for self-employed people include:
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.
When the minimum income floor is being applied and 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.
Some people are exempt from the minimum income floor. This might apply to you if:
- You have limited capability for work or work related activity; or
- You provide 35 or more hours per week of care for a person who receives a disability benefit; or
- You are over 66; or
- You are looking after a child under three; or
- You are a foster carer or a 'friend or family carer' for a child under 16; or
- You have had a child placed with you for adoption in the past 12 months; or
- You were self-employed when you claimed Universal Credit (you will be exempt for 12 months from the date you claimed Universal Credit); or
- You become self-employed after starting your Universal Credit claim (you will be exempt for 12 months from the date you start being self-employed)
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.
John is a self-employed taxi driver aged 35. He has a slow month and only earns £900. His minimum income floor is £10.42 (National Minimum Wage for 23+ year olds) x 35 (hours per week) x 52 (weeks) ÷ 12 (months) = £1,580.37 per month. This amount would be used to determine his Universal Credit payment for that month, rather than his actual earnings of £900.
Starting a business while claiming Universal Credit and the 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 can only have one start-up period for each business and you can only have one start-up period in every five years.
Claiming Universal Credit when you are self employed
The minimum income floor will not be applied for the first twelve months you receive Universal Credit, even if you have been self employed for longer than a year.
If you become self-employed after starting your Universal Credit claim, the twelve month period will apply from the date you become self-employed.
If you are self employed, you will have to supply 'cash-in and cash-out' figures to the Department for Work and Pensions (DWP) for each month-long assessment period. If you fail to supply these figures between seven days before and 14 days after each month, your Universal Credit payment will be suspended.
If you have income in an assessment period that is more than £2,500 over your maximum Universal Credit entitlement, some of this income might be carried over into future assessment periods. If you are affected by this, you should speak to an adviser.
Reviewed: April 2023