Universal Credit – are self-employed people eligible?

Working out what benefits you can claim while self-employed can be confusing. It’s sometimes hard to tell what you’re entitled to, and how much you’ll get, especially as self-employed people’s earnings tend to fluctuate.

That’s where Universal Credit comes in – designed to help those on a lower income or who are out of work. Read on to find out whether you’re eligible, and how much you might get.

What is Universal Credit?

Universal Credit is a payment made monthly (or twice a month for some people in Scotland) that’s intended to help with living costs for people on low incomes and those who are out of work.

Universal Credit replaced six previous UK benefits, including:

• Child Tax Credit
• Housing Benefit
• Income Support
• Income-based Jobseeker’s Allowance
• Income-related Employment Support Allowance
• Working Tax Credit

Universal Credit increases

As part of the Autumn Statement 2023, it was announced that the government would increase Universal Credit by 6.7 per cent in April 2024. This is in line with the September 2023 inflation rate.

This update will see an average increase of £470 for households across the UK.

Who is eligible for Universal Credit?

You may be eligible for Universal Credit if:

• you’re on a low income or currently out of work
• you’re aged 18 or older
• either you or your partner are below the qualifying age for the State Pension Credit
• you and your partner have combined savings of less than £16,000
• you live in the UK

Can self-employed people claim Universal Credit?

Universal Credit is also available to self-employed people, provided they meet the criteria set out above. However, the process for claiming Universal Credit, and the amount you may get, is different.

It’s important to understand that Universal Credit is only available to those whose self-employment is their main source of income. This means that you get regular work from being self-employed and that you expect to make a profit. Your work must also be organised, with invoices and receipts to show for it.

Self-employed people (including company directors, even if they pay themselves through PAYE) must report their earnings at the end of each assessment period, which is normally monthly. You also have to report your expenses each period, along with what the money was spent on, plus tax, National Insurance, and pension contributions.

If you are deemed to be gainfully self-employed, you won’t have to search for other jobs as you would otherwise. Instead, you can focus on building your business.

How much can self-employed people get in Universal Credit?

Self-employed people’s Universal Credit payments fluctuate with their income. The amount you get will also depend on other factors such as whether you’re in a couple or have children.

Your payments will be affected by something called the ‘minimum income floor’. Each month the DWP will look at your expected earnings, and how much you earned in reality. Your expected earnings are the minimum income floor, and this figure will play a role in determining your payments.

The minimum income floor only applies to those who are in the ‘all-work-related requirements group’, meaning those who are expected to either work or look for work. There are some exceptions. For example, the minimum income floor won’t apply if you:

• have been assessed as having limited capability for work or work-related activities
• look after a child under the age of three
• are pregnant or have given birth within the previous 15 weeks
• are caring for a person with severe disabilities
• are in full-time education
• are in the first 12 months of self-employment (known as the start-up period)
• are temporarily too ill to be in gainful employment, and this is affecting your profits

If you earn more than your minimum income floor, your Universal Credit will be ratcheted down as your income rises – so the more you earn, the lower your payments will be.

However, if you earn less than the minimum income floor, your Universal Credit payment will be calculated as if you’d earned the minimum income floor amount – that is, your payment will not go up even if your earnings fall below the floor.

It’s not possible to say exactly how much a self-employed person’s Universal Credit payments will be in advance. However, to get a rough idea, you can use one of the benefits calculators listed here.

What if I’m newly self-employed?

If you’re in your first 12 months of self-employment, you may be eligible for a ‘start-up period’. During this period, which can last up to 12 months, the minimum income floor doesn’t apply. You can also benefit from guidance from a work coach to help you develop your business. You’ll need to meet with your work coach at least once a quarter, and you may need to provide evidence to prove that you’re still gainfully self-employed.

Have you received Universal Credit while self-employed? How was your experience? Let us know in the comments.

More business guides for the self-employed

• Access to Work: a self-employed guide to disability grants
• Self-employed holiday pay: what are you entitled to?
• Sick pay for self-employed people
• What type of business insurance do I need?

Photo: Miljan Živković/stock.adobe.com