Universal credit & Self employed income support

[Ivysmum213]

Hey everyone,

Due to covid-19 my self employment took a turn for the worst in March. Being a single mum with a child under 2 I was left no option but to sign up for universal credits. Prior to this I found myself struggling financially and I was considering seeking help through universal credits. I can only work 3 days a week due to child care this averages around 16hrs a week & £715 a month I earn. I have just been accepted for a 80% grant for 3 months of my wages which gives me £576 a month (for 3 months). My only concern is I’ve not been given a clear indication whether my universal credits will go down because of this. I have business debts i’m behind on due to covid-19 and was going to use the grant to bring me back a float. I have left a message on the journal but the response wasn’t very informative.

Is anyone else is a similar boat as I am? I totally understand if my benefits will go down I’m just seeking advice more because if I pay my debts with the grant and my benefits do go down then I’ll be left short and obviously paying my household bills and putting food on the table is more important currently.

If anyone works and earns around the same as me could you give me some insight on what you’re entitled to as I’ve been given zero information. I’ve only visited the job centre once and that visit was very in and out with little information and after that we went into lockdown so I had one phone call accepting my claim.

Hope someone can help

I think your work allowance is £292.00 in the assessment period for universal credit. So, my understanding is that if you're earning £576 per month you get £292 without any money being deducted. However, for every £1 of the remaining £284, 63p is taken from your universal credit payment. So, £284 x 0.63 = £178.92 taken off your universal credit payment.

Maybe you might be better off working less hours to avoid that reduction? Also, have you applied for housing benefit and council tax benefit too? Also, try looking on the gingerbread single parents website for advice.

When you receive the SEISS grant it will be a lump sum and the full amount will count as income in the month that you receive it. So one benefit of this is that UC you have already received would not need to be repaid; however, in the month you receive the lump sum you are unlikely to be eligible for any UC at all. If this happens your claim will close and you will need to reapply for UC if you think you may be eligible in future months (download your journal and payment statements first as you lose everything when you reclaim). You will also need to budget for this happening.

Might you be eligible for a small business grant?

www.gov.uk/government/publications/coronavirus-covid-19-business-support-grant-funding-guidance-for-businesses

Working fewer hours will always mean you are worse off when on UC so not sure why that has been suggested. And obviously working fewer hours would have no effect on the amount of the SEISS payment which is based on previous earnings.

Also, you can't claim housing benefit at the same time as universal credit (unless you are in temporary accommodation). You may be eligible for council tax reduction though if you haven't claimed that yet.

When putting your income into UC could you put incomings=grant, then outgoings=debt, that way you are reducing your income so should equal out?

MiniMum 97; I receive universal credit and housing/council tax benefit. You can claim it if you are on a low income.

I suggested that she worked reduced hours because she may actually be better off financially. This works for some people, but I accept it may not work for all. If she needs to get her debts down then she may find it useful talking to someone at Citizens's Advice too.

At the moment I’m not working at all due to covid-19 to reduce any hours. I’m being paid £615 monthly currently through universal credits while I’m not able to work

I'm a singe parent too and had to give up self-employment when the schools shut. I'd preferred not to have signed up for universal credit but couldn't see there being any other way to pay the bills and put food on the table. My wages are low so there was no point in me pursuing the self-employment support scheme.

I hope you find a way to make ends meet.

@tickertyboo (sorry app not letting me tag again!)

I am a specialist benefits adviser and I advise on universal credit everyday. I can assure you that you can only claim help with rent via housing benefit while claiming universal credit if you are in temporary accommodation and in some types of sheltered or supported housing.

Otherwise your housing benefit claim will stop (after a 2 week run on) once you claim universal credit. You then get your help with rent through your universal credit by way of a housing element.

Some people get confused and still call this housing benefit. This happens more often if their rent is paid direct to their landlord.

Council tax reduction (sometimes called council tax support) is still administered and paid by the local council.

If you receive a severe disability premium or are over pension age (and not in a mixed age couple) then you can also make a new claim for housing benefit. But unless something has gone wrong you wouldn't also be getting universal credit.

Hope that helps clarify.

Yes @CatEarCatWorld makes a good suggestion. When you declare income you can deduct permitted expenses. The rules in this are quite complex:

revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/calculating-income-from-self-employment/

Worth sitting down and working through them as deducted expenses (and if applicable offsetting losses from previous APs) could make a big difference to your UC.

MiniMum97, that is useful to know and thank you for clarifying that for me. The money gets paid to me and I pay it to my landlord.

Ivysmum213 is on a low income; prior to signing up for universal credit she was earning on average £8,580 per year. I assume she won't be paying tax on that. How does that work in relation to deducting expenses? I thought there was very little point in deducting expenses when you don't pay tax? Could you advise on that one please?

Surely they would have to be very hefty expenses in order to get her income down further?

Please don't think that I am knocking your advice by the way. It is all very helpful.

Hi @tickertyboo

When thinking about Universal Credit it is pretty much always worth deducting expenses. The only time when it might not be is if you are eligible for a work allowance and your income was always below that. However as losses can usually be carried forward then it’s likely to be sensible to calculate your income correctly for UC purposes so you know your award is going to be correct.

For example, in the OP’s case assuming her income is £8580 per year and is received at a steady rate throughout the year, she would have income of £715 pcm. As you have said above, assuming she has housing costs included in her claim she will have a work allowance of £292 so 63% of £423 of her income will be deducted from her UC - about £266.49.

If however she had permitted expenses in that assessment period of say £200, her income would only be £515 in the assessment period rather than £715, so rather than £266 being deducted it would be 63% of £223 UC so only £140.49.

Hopefully I’ve done the maths right as am
on my phone! But I hope you get the gist either way.

Obviously as explained above when she receives the SEISS grant that will be treated as income received in that assessment period so even more important to deduct any expenses.

Hope that helps.

Thanks for that Minimum97. I could see that method working effectively if she had £200 in expenses to deduct every month. But what if her expenses are next to nothing each month?

She is also in debt too. Are there any more ways that she can maximise her income? This will be my last question!

I understand the logic behind carrying forward losses but realistically, how long can a business carry on operating at a loss? Would it be in her interests to simply close her business, not work and remain in receipt of universal credit for as long as she can? She would at least then have a steady and guaranteed income to work with, enabling her to pay her debts off?

OP, do you rent and claim the housing element of UC? (Or do you have a mortgage?) Your work allowance - ie the amount of earnings that will be disregarded before they start reducing your UC - is different depending whether you are claiming the housing element or not.

Based on the fact that you said you're getting £615/month, my guess is that you're not getting the housing element. (It looks like you're getting the standard element plus child element for one child, minus a small deduction - possibly for an advance payment.) If you're renting, you're probably entitled to the housing element, so you should add a message to your UC account to request it. If you have a mortgage, you won't get the housing element, but your work allowance will be £512/month. The SEISS payment will be treated as earnings, so they will let you keep most of it and only deduct about £40 from your UC (if no housing element).

However, I would always advise caution about using lump sum payments to pay off debts when money is tight for paying essentials. I would advise you to talk to citizens advice or national debtline first. There is a business debtline too.

Also, I know tickertyboo means well but she has given some wrong advice so please ignore it.

"Maybe you might be better off working less hours to avoid that reduction?"

This, for example. The whole UC system was designed so that people are always better off the more they work.

"The SEISS payment will be treated as earnings, so they will let you keep most of it and only deduct about £40 from your UC (if no housing element)."

Just to clarify, this is based on you receiving £576/month. But if you get more than this the first month (because of receiving a backdated payment) more will be deducted from your UC.

AnotherEmma. Sadly, the universal credit system does not make people better off when they work more.

I bow to your superior knowledge and experience, perhaps you could do my job for me

tickertyboo
Please can you explain your reasoning on this as I agree with @AnotherEmma. It is correct that universal credit does not increase if you work, but it doesn’t reduce fully either.

Universal credit reduces by 63p for every £1 of earnings including self employed earnings. (This may be after some of it is ignored due to a work allowance.)

Have a read of The Resolution Foundation Report 'Credit where it's due?' Assessing the benefits and risks of Universal Credit.' Page 6 states: 'The interaction of work allowances and the taper within UC mean that families keep more of their benefit entitlement at low hours of work. But they also lose more as their earnings rise or as a second earner enters work'.

How many benefit calculations have you done?

You can quote obscure reports as much as you like but the reality is that the vast majority of claimants are better off as they work more.

Hi @tickertyboo Only the OP will know enough about her business and her business debts to decide whether she can or wants to continue with it. And I don’t have enough info to look at further maximisation of income. As @AnotherEmma says she could contact Business Debtline for further advice about her business debts and debt options. Re her UC obviously the fewer expenses she can deduct, the more will be deducted from her UC but she will always be better off with earnings than not, and longer term her business may be very profitable and could therefore be her way off benefits; we don’t know what her business is or have an idea of its long term prospects to be able to judge. And I am definitely not an expert in running a business so wouldn’t want to pass comment on this anyway!!

I agree with @AnotherEmma. You are ALWAYS better off working because only 63% of your earnings would be deducted (after any work allowance).

AnotherEmma, The Resolution Foundation is an independent think tank which focuses on improving the living standards of those on low to middle incomes. I trust what they say. I'm sorry that my comments don't agree with your narrative.