Universal Credit income: Self-employed earnings

If you're self-employed, the work allowance and taper rate are the same as employed people (see previous section). However, a ' minimum income floor ' can also be used for self-employed people.

The minimum income floor is an amount of money the Department for Work and Pensions (DWP) treats you as earning, even if you actually earn less. It does not apply if you are in a start-up period.

Start-up period

If you start a business while claiming Universal Credit, the minimum income floor will not apply for your 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 using your actual earnings, even if they are lower than your minimum income floor .

You can have a start-up period whether your business is new or already running, as long as you haven't had one before for that business. You can only have one start-up period for each business and you can only have one start-up period in every five years.

Minimum income floor

If the minimum income floor applies and you earn below this level in any month, Universal Credit will still treat you as if you earned 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.

The minimum income floor doesn't apply if you are not expected to look for work.

You can read more about that in our Self Employment and Benefits guide.

Example 1

Liam is 35 and a self-employed taxi driver.

He has a slow month and only earns £1,000.

His minimum income floor is: £12.71 (National Minimum Wage for 21+ year olds) x 35 (hours per week) x 52 (weeks) ÷ 12 (months) = £1,927.69 per month. This amount would be used to determine his Universal Credit payment for that month, rather than his actual earnings of £1,000.

Example 2

Sally is 20 and a self-employed hairdresser.

In her claimant commitment she has agreed that she can work a maximum of 25 hours per week because she has to look after her son before and after school.

She has a good month and earns £1,200.

Her minimum income floor is £10.85 (National Minimum Wage for 18-20 year olds) x 25 (hours per week) x 52 (weeks) ÷ 12 months = £1,175.42 per month.

Sally's Universal Credit payment that month would be calculated using her actual earnings of £1,200 rather than her minimum income floor .

If your earnings change each month

If you are self-employed and your earnings change each month, it can help to:

• do calculations for the specific assessment period you want to understand, or
• do two example calculations (one for a good month and one for a bad month) to get a realistic sense of how your income fluctuations might affect your Universal Credit.

This is important if the minimum income floor applies to you because earning less in one month might not increase your Universal Credit as much as you expect.

You can use the Turn2us Benefits Calculator to run several example calculations to see how they might affect your Universal Credit.

Use the Turn2us Benefits Calculator

Paying your tax and national insurance

Universal Credit only takes tax and national insurance payments into account in the Assessment Period you pay them in.

This can cause problems for people who usually pay their tax and national insurance annually or twice a year.

For example, Julie is a self-employed gardener. She pays her tax and national insurance in January and July. She usually earns about £2,000 a month profit from her self employment. She pays £1,500 tax and NI in July and £1,500 tax and NI in January. For those two months, Universal Credit treats her as having only earned £500 for the month. This means that twice a year her income looks like it has fallen below the Minimum Income Floor , and the Department for Work and Pensions (DWP) applies the Minimum Income Floor to her earnings instead. This leaves Julie worse off.

If you pay Self Assessment tax and are up to date with your payments, you may be able to set up a Budget Payment Plan with HMRC to make weekly or monthly payments towards your next bill. Visit the HMRC website for more information. 

This can help to keep your income more even through the year and some people find it helps their budgeting. 

This will not be right for everyone. You may want to get tax advice before changing how you pay HMRC.

Proof of self-employed earnings, expenses and tax paid

If you are self employed, you will have to supply monthly 'cash-in and cash-out' figures to the DWP. This can include:

• how much you earned
• your business expenses such as travel costs, stock, equipment and tools, and office costs
• how much tax and NI your business paid

The DWP will send you a text message or email when you need to report this. If you report late, your Universal Credit payment will be delayed.

You can find more information about reporting your income and expenses from self-employment on GOV.UK.

Here are useful links on paying your self assessment tax bill:

• Paying your self assessment tax bill weekly or monthly
• Self assessment tax payments