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Universal Credit: Can you claim Universal Credit if you are self-employed?

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Universal Credit is a benefit which has seen a huge increase in claimants since the beginning of the coronavirus outbreak. This payment is available to those on a low income or out of work, having replaced six other legacy benefits. But what expenses can I claim for Universal Credit?

What is Universal Credit?

Universal Credit is a single payment available to those who are on a low income or out of work.

It replaced six legacy benefits which are:

  • Income Support
  • Working Tax Credit
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)
  • Housing Benefit
  • Child Tax Credit.

To successfully claim Universal Credit you must:

  • Be aged 18 and over, or in some certain situations 16 or 17 years olds are eligible
  • Be under State Pension age
  • Live in the UK and there are extra rules if you are not a British citizen
  • Have less than £16,000 in savings.

If you live with a partner, their income level and savings will also be taken into account.

You may also get Universal Credit if you live with other people, but it may affect how much you receive.

Can you apply for Universal Credit if you are self-employed?

You may apply for Universal Credit if you are self-employed.

At the end of each monthly assessment period you will need to report the following:

  • How much you earned from self-employment even if it is nothing
  • Any money you paid into a pension
  • Information about your business.
  • This also applies to company directors and those paying themselves by PAYE.

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The information about your business must include:

  • The total amount your business received
  • How much your business spent on different expenses
  • How much tax and National Insurance your business paid.

You are not required to report things your company already owns such as machinery, buildings and cash in your company account.

What expenses can you claim for on Universal Credit?

Self-employed person’s gross earnings are calculated as gross profit of the business less certain allowable expenses.

Allowable expenses include:

  • Repayments of capital on loans used to replace or repair equipment needed for the business
  • The cost of replacing or repairing equipment needed for the business
  • Interest paid on business loans
  • VAT paid in excess of VAT received
  • Expenses paid for the purposes of the business
  • Bad debts that have been defaulted on.
  • Expenses which are not allowable include:
  • Money spent on new equipment or to set up or expand the business
  • Amounts for depreciation or write-offs
  • Domestic or personal expenses not essential to the business
  • Money spent on business entertainments or meals.

How is your Universal Credit payment calculated?

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

If you are both self-employed and employed, your Universal Credit payment will be calculated based on your combined earnings from self-employment and employment.

You are required to report the following changes in your circumstances:

  • The closure of your business
  • Starting a different kind of business
  • Taking on a permanent job
  • If you are no longer able to work.

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