Benefits for self-employed people – a guide

• Universal Credit
• Self-employed minimum income floor
• Job Seeker’s Allowance
• Employment Allowance
• Housing Benefit
• Working Tax Credit
• Council Tax Reduction
• Child Tax Credit
• Employment and Support Allowance
• Pension Credit

UC – Universal Credit

Universal Credit (UC) is replacing several of the government’s previously existing benefits:

• Child Tax Credit
• Housing Benefit
• Income Support
• income-based Jobseeker’s Allowance (JSA)
• income-related Employment and Support Allowance (ESA)
• Working Tax Credit

It’s a payment to help with your living costs if you’re on a low income or out of work. Most people on Universal Credit receive a monthly amount (some people in Scotland get paid twice a month).

You may be eligible if:

• you’re on a low income or out of work
• you’re 18 or over (there are some exceptions if you’re 16 to 17)
• you’re under State Pension age (or your partner is)
• you and your partner have £16,000 or less in savings between you
• you live in the UK

How to apply for Universal Credit – and how much can you get?

Your UC payments will depend on your earnings and whether you have children, have a disability or health condition that stops you working, or if you need help paying your rent. If you live with your partner, their income and savings will be taken into account too.

You can use the benefits calculator on the government website to work out how much you’ll get.

The government website has more information on how to claim Universal Credit when self-employed.

Self-employed minimum income floor

The minimum income floor (an assumed level of income) was relaxed for all UC claimants during the Covid-19 pandemic, however the pre-pandemic rules have now returned.

As of 31 July 2021, the minimum income floor might apply to you if you’re ‘gainfully’ self-employed. Essentially this means if being self-employed is your main job, it provides a regular income, and you expect to make a profit. You’ll also need to be in the ‘all work-related requirements group’ on your UC account and are expected to work or look for work.

If you’re not in gainful self-employment then your payments will be based on how much you actually earn.

What if I’m sick?

If you’re not eligible for Statutory Sick Pay, you can apply for Universal Credit and/or New Style Employment and Support Allowance.

If you already have a claim for Universal Credit and become unwell, you can be treated as having a temporary period of sickness.

Am I eligible for a ‘start-up period’?

If you’re in gainful self-employment, you may be eligible for a ‘start-up period’ where the minimum income floor won’t be applied for up to one year.

You won’t have to look for employment during this time and your actual earnings will be taken into account when working out your UC payments.

Jobseeker’s Allowance (JSA)

Self-employed Jobseeker’s Allowance (JSA) is designed to give support if you’re on a low income, or out of work. Claiming JSA after being self-employed is possible, you just need to understand the category you fall into, and how to apply.

There are three types of JSA – ‘new style’, contribution-based, and income-based. If you’re self-employed, you won’t be eligible for ‘new style’ or contribution-based JSA, as this type would depend on your Class 1 National Insurance Contributions (NICs). Being self-employed, you don’t pay these. There are a couple of very specific exceptions to this – to see who is entitled to Job Seeker’s Allowance, check the government’s JSA eligibility information.

You may, however, be eligible for income-based JSA. This is means-tested, and an important benefit for self-employed people on low income. Whether you can get it will depend on your age, immigration and education status (part-time students generally won’t be eligible) and crucially, how many hours you’re working every week. If it’s less than 16 you could be eligible.

How much is Job Seeker’s Allowance?

It depends on your age, income and savings. You can use a benefits calculator on the government website to find out how much you’ll get.

The following JSA amounts are usually paid every two weeks:

• up to £59.20 (if you’re up to 24)
• up to £74.70 (if you’re 25 or over)

Employment Allowance – for employers

If you’re an employer, you can reduce your National Insurance contributions by claiming Employment Allowance.

The government increased the Employment Allowance from April 2022, so you can claim up to £5,000 for the 2023-24 tax year onwards.

You may be eligible if:

• you’re a registered employer
• you’re a sole trader, limited company or partnership with employees
• your Class 1 National Insurance liabilities were less than £100,000 in the previous tax year

You can’t claim Employment Allowance for off-payroll workers, for example contractors.

Claims can be made through your own payroll software or HMRC’s basic PAYE tools.

Housing Benefit

Housing Benefit is being replaced by Universal Credit, and you can only make a new claim if one of these criteria applies to you:

• you’ve reached State Pension age
• you live in temporary accommodation
• you live in sheltered or supported housing with special facilities such as alarms or wardens

If none of these apply, you’ll need to claim Universal Credit instead.

For people who are still eligible for Housing Benefit, your living arrangements are important. If you live in the home of a close relative, or you’re a full-time student (unless you’re disabled), you won’t be able to claim. You usually won’t be eligible if you have savings over £16,000, or if you’re claiming Universal Credit at the same time.

How much Housing Benefit will I get?

There are lots of other conditions and things to factor in, and the best place to read up is always the government’s dedicated Housing Benefit page, for the latest guidance.

Get organised now though by having a clean copy of your accounts to hand, or the right details to complete a certificate of earnings form, as well as the Housing Benefits application form.

Working Tax Credit

You can only make a claim for Working Tax Credit if you’re already getting Child Tax Credit.

For most new claims, Universal Credit has replaced Working Tax Credit (WTC). As one of the key self-employed tax benefits for businesses in the UK, it’s worth reading up about what this means for you.

If you’re already claiming WTC or meet the new eligibility criteria, you’ll need to be working for more than 30 hours a week (it can be less depending on your age and circumstances) to keep the WTC.

How much WTC will I get?

The basic annual amount of Working Tax Credit is up to £2,070. Factors like whether you’re in a couple, a single parent, work at least 30 hours a week, or have a disability may affect the amount you get.

Council Tax Reduction

Council Tax Reduction (also known as ‘Council Tax Support’) allows people on a low income to pay a reduced bill, making it another of our key benefits for the self-employed. You may even be eligible to stop paying Council Tax altogether.

The first thing to do is check how your local council manages council tax reduction on the government’s website, using their postcode checker.

How much Council Tax Reduction will I get?

You can apply for the benefit whether you own your home, rent, are unemployed or working, but eligibility and what you get will depend on your circumstances, household income, and whether anyone else lives with you.

Based in Northern Ireland? Here’s some advice on a separate scheme for Northern Ireland.

Child Tax Credit (and Child Benefit)

Self-employed tax benefits are important considerations for families, too. Whilst we’re here, self-employed tax-free childcare is another key support to look into, so read up on our guide to applying, as well as the benefits below.

Child Tax Credit

This benefit has now been replaced by Universal Credit for most new applications.

If you still meet the eligibility criteria, your Child Tax Credit is calculated on a number of factors including your income, how many children live with you, their age and whether any of them have a disability.

Check with gov.uk to see if you’re eligible for Child Tax Credit, and how yours will be worked out.

Child Benefit

A key benefit for families across the UK, you can get Child Benefit if you’re responsible for one or more children under the age of 16 (or 20, depending on their education status).

Again, this has its benefits for the self-employed, but you may have to pay a tax charge if your income (or your partner’s) is over £60,000.

Top tip: even if you don’t want to claim, filling out the form will help you get National Insurance credits, which count towards your State Pension.

Take a look at the government’s Child Benefit overview, to understand what’s important when sorting out your Child Benefit arrangements.

Employment and Support Allowance

If you’re unable to work because of an illness or disability, you may be able to claim Employment and Support Allowance (ESA).

This benefit depends on a number of factors, including age and income circumstances – the Citizens Advice website lists everything you need to do on its ESA overview page, and you can also get clear guidance from your local Citizens Advice Bureau. You should also note that you may be required to undergo a Work Capability Assessment in order to claim ESA.

How much ESA will I get?

While your claim is being assessed, you’ll normally be on one of the following rates for 13 weeks:

• up to £59.20 a week (if you’re under 25)
• up to £74.70 a week (if you’re 25 or over)

After you’re assessed, you’ll be on one of the following rates:

• up to £74.70 a week (if you’re able to go back to work)
• up to £114.10 a week (if you’re not able to go back to work)

Pension Credit

Last but not least in our guide to self-employed tax benefits, if you’re above state pension age you may be eligible for Pension Credit. Whether you’re a long way off or just round the corner from state pension age, put it on your radar – it’s an important one for the self-employed.

Pension Credit tops up your weekly income, or your joint weekly income if you have a partner.

Planning for retirement? You should also check out our guide to setting up your own self-employed pension.

How much Pension Credit will I get?

The amount you’ll get depends if you’re a single person or a couple. Each week, Pension Credit tops up:

• your weekly income to £177.10 (single person)
• your joint weekly income to £270.30 (couples)

Other factors may mean you get more than this – you can use the government Pension Credit calculator to check the amount you’ll get.

Guides and resources for the self-employed

• A budget calculator and guide for the self-employed
• Is business insurance a legal requirement?

This article is just for guidance. You should always seek independent, tailored advice, for example from your local Citizens Advice Bureau, before taking action.