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HMRC internal manual

Tax Credits Manual

Eligibility - income (employed and self-employed): Self-employed income (Introduction)

Where income needs to be taken into account in the calculation of a tax credit award, customers supply details of income from the following sources, each of which is taken into account. These are

  • employment income
  • self-employment income
  • Social Security benefit income
  • miscellaneous income
    and the following that are collectively known as other income 
  • pension income
  • investment income
  • property income
  • student income
  • foreign income
  • notional income.

Note: Guidance on when income needs to be taken into account in the calculation of a tax credit award and the periods over which it needs to be measured for any particular award, are covered in TCM0132120.

A customer’s statement of self-employment should be accepted unless there is reason to doubt it.

The customer must meet the conditions of entitlement to Working Tax Credit (WTC) as set out in Regulation 4 of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002.

A self-employed earner is a person who

  • is gainfully employed in Great Britain or Northern Ireland otherwise than as an employed earner, whether or not other employment is undertaken as an employed earner
  • enters into a contract to provide services for a client or customer as a sole trader or in partnership with others
  • is responsible to the full extent of their assets for the debts of the business
  • is entitled to all the profits of the business (if a sole trader) or the agreed share of profits (if in a partnership)
  • is subject to taxation under Income Tax (Trading and Other Income) Act 2005 ITTOIA) 2005.