Self-employment and Universal Credit

Universal Credit is a monthly payment to help with your living costs. You may be able to get it if you’re on a low income, out of work or you cannot work.

Find out if you’re eligible for Universal Credit.

If you live in Northern Ireland, go to Universal Credit in Northern Ireland.

Apply for Universal Credit.

Reporting your income and expenses

At the end of each monthly assessment period, you’ll need to report:

  • how much you earned from self-employment, even if it’s nothing
  • any money you paid into a pension
  • payments into and out of your business

This also applies to company directors, even those paying themselves by PAYE.

Do this by completing the ‘Report your income and expenses’ section in your online Universal Credit account.

Payments into and out of your business

You’ll need to report payments into and out of your business in each monthly assessment period. This includes:

  • the total amount your business received
  • how much your business spent on different types of expenses, such as travel costs, stock, equipment and tools, protective clothing and office costs
  • how much tax and National Insurance your business paid

There’s more guidance about reporting your income and expenses from self-employment, which includes how to work out your income and the expenses you can include.

Your business’s property

You do not need to report things your company already owns (‘business assets’), such as machinery, buildings or cash in your company account.

Showing that self-employment is your main work

To claim Universal Credit if you’re self-employed, you need to show that self-employment is your main work.

This includes showing that:

  • self-employment is your main job or your main source of income
  • you get regular work from self-employment
  • your work is organised - this means you have invoices and receipts, or accounts
  • you expect to make a profit

Do this by giving your work coach evidence of your:

  • tax returns, accounts and any business plan
  • Unique Taxpayer Reference (UTR), if you’re registered for Self Assessment
  • customer and supplier lists, receipts and invoices
  • marketing materials

If you can show all these things, you’ll be considered ‘gainfully self-employed’. This means you do not have to look for other work and can concentrate on growing your business.

If you cannot show all these things, you might have to look for other work if you want to keep getting Universal Credit.

This depends on your circumstances - you’ll agree this when you meet your work coach.

How your Universal Credit payment is worked out

Your Universal Credit payment will be based on the earnings you report at the end of each monthly assessment period.

If you’re gainfully self-employed, your Universal Credit payment may be calculated using an assumed level of earnings, called a minimum income floor.

It’s based on what an employed person on minimum wage would expect to earn in similar circumstances.

If you earn more than this, then your Universal Credit amount is based on your actual earnings.

If you earn less, the minimum income floor is used to work out how much you can get. You may need to look for additional work to top up your income.

If you’re both self-employed and employed

Your Universal Credit payment will be calculated based on your combined earnings from self-employment and employment.

If you make a loss from self-employment, only your employment earnings will be used to calculate how much Universal Credit you get.

Get a start up period

You may be eligible for a 12 month start up period if you’re self-employed. Your work coach can tell you if you can get a start up period for your business.

During your start up period your monthly earnings are used to work out your Universal Credit and the minimum income floor does not apply. You’ll also receive support from a work coach who’s trained to work with the self-employed.

You’ll need to attend quarterly appointments with your work coach, providing evidence to show that you’re still gainfully self-employed and actively taking steps to build your business.

You’re only entitled to one start up period, unless it has been more than 5 years since your previous one, and you’ve started a completely different type of self-employment.

Reporting changes in your circumstances

You’ll need to report any change in circumstances, for example if you:

  • close your business
  • start a different kind of business
  • take a permanent job
  • are no longer able to work