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Original poster

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

105 replies

Muva14 · 04/02/2024 19:40

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?

OP posts:

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Changingplace · 07/02/2024 07:19

FriendlyNeighbourhoodAccountant · 05/02/2024 19:19

If you close the business down with money still in the bank that money is then transferred to the crown. It's no longer yours. It's a mistake a few people make. All monies must be dealt with before a company is dissolved.

If you want to take out all the money from a business then you take it as salary or dividends, and are taxed accordingly at that point. You wouldn't repay UC from prior periods as UC uses "real time" data, but it would affect that current month's claim (and if it was over the savings allowances you may lose your entitlement to UC all together or for the foreseeable). The longer you leave it in the business to build up the more likely this is the case. So it's swings and roundabouts.

Show quote history

So if someone takes a low salary, is awarded UC but has profits in the bank.

They then take the profits as dividends, and dissolve the company- they keep those profits, plus the UC they’ve claimed, and that’s allowed?

Even if the dividends at that point are taxed I don’t see how that should be right that UC should’ve been awarded.

IlsSortLaPlupartAuNuitMostly · 07/02/2024 07:26

Changingplace · 07/02/2024 07:19

So if someone takes a low salary, is awarded UC but has profits in the bank.

They then take the profits as dividends, and dissolve the company- they keep those profits, plus the UC they’ve claimed, and that’s allowed?

Even if the dividends at that point are taxed I don’t see how that should be right that UC should’ve been awarded.

Show quote history

No, that wouldn't happen, precisely because of the process the OP is complaining about. If the months' income was three thousand more than the month's expenses for the company but she only took a thousand out as salary then UC would treat her as if she had an income of three thousand.

It's an additional hassle for the OP but it's the way to prevent some very obvious abuses of the system.

IlsSortLaPlupartAuNuitMostly · 07/02/2024 07:34

OneMoreTime23 · 06/02/2024 09:10

The costs and administrative burden of owning a Ltd company are weighty though. Hard to imagine it is worth it (but have never claimed benefits).

And it’s NOT self employment, which is a completely different legal status.

Show quote history

Normally you wouldn't work through a limited company for a lowish income because the tax advantages wouldn't be worth the hassle.

But you might well set up a company and then a few years later find yourself having a temporarily lower turnover/profit due to childrearing, illness or an unexpected downturn in your sector, leaving you needing to claim UC. Also I think some contracts require you to be a limited company rather than a sole trader.

FriendlyNeighbourhoodAccountant · 07/02/2024 08:04

Changingplace · 07/02/2024 07:19

So if someone takes a low salary, is awarded UC but has profits in the bank.

They then take the profits as dividends, and dissolve the company- they keep those profits, plus the UC they’ve claimed, and that’s allowed?

Even if the dividends at that point are taxed I don’t see how that should be right that UC should’ve been awarded.

Show quote history

No, because as I've said UC will take into consideration the company profits and cash position each month so if there is money available or the OP is taking a smaller wage to leave profits in the business she won't receive UC.

LakieLady · 07/02/2024 21:14

Sharksarescary · 04/02/2024 20:49

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.

Spot on.

UC for self-employed people is based on actual income in each monthly assessment period, not what you choose to pay yourself. It's treated completely differently from tax, which is based on profit across the year.

You need to report the company income and expenses every month.

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