Universal Credit wants to know all my business income and expenses every month

[Muva14]

I run a very small LTD company for over 2 years. I had always paid myself a set amount of £1000 per month through HMRC and then would claim Universal Credit for whatever they decided I was entitled to, for example rent, childcare etc.

Last year, they decided I had to declare ALL my business income and expenses. I was a little confused as I was told something completely different for the first year, and now felt it would be extremely time consuming to report all my income and expenses every month. I also feel it is none of their business what the Ltd company is bringing in if I am only paying myself a set amount out of it. I was not taking dividends.

They have put my payments on hold for the last few months and so I have been struggling financially a little since then. I am worried they might say I am making "too much" in the company and also because I cannot be asked to sit there and waste time writing out all the income and expenses.

I am looking to come off Universal Credit completely as I would like to apply for a mortgage in the next few months, however I am not getting any support with childcare of anything. I'm worried I may be missing out from support/ other benefits. I can't seem to get my head around it all. Is there anyone that can advise?

I'm also not sure if I can apply for a mortgage whilst still on Universal Credit?

I keep meticulous records.... But most definitely do not do them weekly whilst working and juggling 4 dc 2 of which have ASD... Apparently as SE you have to actually speak to an adviser every Friday and submit earnings for that week. Not use the online portal employed claimants use... And if you can't get through it goes down as you aren't eligible for UC that week. Obviously hoping this is incorrect... Who has time for that?

This might give you some clues.
https://www.entitledto.co.uk/help/selfemployedincomereceive

No, this is almost nothing to do with accounting other than the income/expenses (and I assume bank balance) UC wants to know about. Your business, including it's tax and accounts, is treated differently with HMRC, under tax legislation. UC is different so it takes into account your company's income as your own. Any residual cash in the company bank account could be considered savings, I don't know the ins and outs of what they look at, as I said it's different to accounting rules.

When you say what other benefits people look at, what are you meaning? Legacy benefits such as tax credits, housing benefit, income support etc are gone for new applicants. It is all replaced by UC, so unless you have a disability most benefit claims will be via UC.

It really is as simple as providing UC with the information they ask for on a monthly basis and they'll calculate if there is an entitlement to UC.

Yes the 'extra money' is seen as profit. Because it is profit.

You should have a job coach you can communicate with via your journal.

And all roads lead to universal credit now because the point of it is that it's universal.

This isn't true, I'm self employed and submit mine monthly online

You are not self employed though.
A Ltd company is a separate legal entity and you are an employee and director of that company
Do you, or have you ever taken dividends?

Here's an example submission of mine. I am fully self employed. It's done monthly online.

For example

Business is in profit by £2.5k per month

You decide to pay yourself £1k per month

You tell UC that you earn £1k per month

UC needs to know about the additional £1.5k per month, which you've squirrelled away and 'forgotten' to tell them about

Obviously, it is a very simplistic view, but you see why UC needs to know the whole picture

It has nothing to do with ‘feelings’ it’s about actual profits. What you decide to pay yourself has no value in deciding whether you are entitled to UC. It’s as simple as that.

If you have not declared all your profits you will be asked to pay back any UC you claimed which you were not entitled to.

Oh yes that's true, I'm sole trader not sure the rules on Ltd company although I remember my job coach saying I had to let them know if I went in that direction but I think she said the rules were largely the same.

Thank you that is very informative and helpful.. Phew...

If you really don't want to claim universal credit and declare your business income and expenses every month, you could claim tax free childcare instead, but you'll likely be a lot better off getting childcare help through universal credit than through tax free childcare

Treated the same as self employed for UC purposes.

Is the business making a net profit? If it is, what's happening to that? Presumably UC want to check you aren't using Tax Payers to top up your income instead of your business?

I don't feel my business would do very well if I earned more than 1k a month from it as its still new, that's all. But would that mean that extra money is seen as profit? God knows

Yes of course the extra money you choose not to pay yourself directly is profit.

You can’t make (made up figures!) £10k a month, decide to pay yourself £1k a month and then claim UC on what you’ve paid as a wage. Where does the remaining money sit? Have you done tax returns?

I think you need some accounting/business advice OP or you’re going to get yourself in a mess here.

You need to talk to your job coach. It's not true that you have no one to ask for advice from this from - you literally just message them via your online journal.

There's plenty of help available.

I hate the Tories as much as anyone else but I had to apply for universal credit after LTB and they've been supportive and transparent throughout. It's not a hard system to navigate as SE.

Minimal Income Floor is what they assume you would be making if you were to work full time on NMW. This is what they base their calculations on, even if you didn't not reach that figure.

In the first year you have some leeway because you are given some time to develop your business, and reach it, hence "minimum'. After that they assume you've reached that amount.

So, no you cannot just give yourself £1000 a month and be done with it. They need your income/expenses every month.

This is mostly nonsense. Under accounting and tax rules the OP could quite legally pay herself 1k a month, leaving 100k in the company's bank account if she chose to. The remaining money is accounted for and taxed via corporation tax as it's own entity, not via income tax as an employee or director would be. UC's rules are nothing to do with any tax returns.

The OP doesn't need accounting advice, she just needs to realise that UC treat her company differently to the way tax treats it, and that she needs to declare what she's asked on a monthly basis. If she has any questions she needs to speak to her job coach.

I'm afraid OP if you are claiming any type of benefit that's based on income levels like UC then they do want to know and see your figures- and to be honest have every right to as they are giving you public money. If you aren't claiming a penny then they won't be on your back apart from annual returns etc - as it is you could be paying yourself £1000 a month but after costs have £2500 a month free and have chosen to buy assets or leave it there or whatever and not be entitled to UC

In terms of accounting and tax legislation this is correct, but for UC purposes you are treated as self employed to ensure directors and shareholders are not taking minimal earnings and leaving vast profits in the company.

They have put my payments on hold for the last few months and so I have been struggling financially a little since then. I am worried they might say I am making "too much" in the company and also because I cannot be asked to sit there and waste time writing out all the income and expenses.

Your payments are on hold because you have not reported your income and expenses. Once you do this your payments will be calculated. If you continue to not report then your claim will close.

Self employed claims are one of the areas being looked at closely by the new UC Review Teams.

There are no other benefits other than UC to top up a low income. the only other one really is council tax support but doesn't sound like you'd be eligible for that. Uc is 6 previous legacy benefits now rolled into one, so it really is the only option.
It sounds like you are in the first 12 month start up period of your business, and now the minimum income floor will apply ? I presume they need to see details of your accounts to check you are still gainfully self employed maybe and to check that you can still continue to claim UC.

I think this is exactly where my confusion lay to begin with, it is the being made out to doing something terribly wrong, but my intention isn't that as it all gets accounted for in the end I thought - right back to HMRC?

I barely understand the accounting rules in the first place, let alone UC, but I do my best not to F either of them up. I will figure out who the job coach is and go from there I suppose.

Thanks to everyone for your input and advise. I definitely have a better understanding than when I posted a few hours ago.

I understand the confusion. In layman's terms for your annual accounts/CT600/SATR your company and you are separate legal entities. This means you pay tax and NI on any salary and dividends you take, and the company is taxed on its profits. These are two separate taxes.

For UC purposes you are seen as self employed and the company's profits are your own. This is to stop someone earning £££ in their company but taking the minimum salary, in order to be topped up by UC.

Initially speak to your job coach and get the ball rolling on how you report your income/expenses monthly. Secondly, if you do struggle with the accounting side (on a separate note), an accountant can be worth their weight in gold and might be a good idea to have a chat with one.

I am shocked that this was ever allowed. Just keep the profits sitting in your business account and only pay £1000 into your personal account a month so you can be topped up. That's mental that that was allowed.