Self-employed benefits entitlement: what you should know

When you’re running a small business, every penny counts. So it really makes sense to know the facts around self-employed benefits entitlement, and what to keep an eye on, for the future.

As one of our most popular articles we have updated this for 2017.

Which self-employed benefits should you know about?

From housing benefits to tax credits, and questions like ‘can I claim job seeker’s allowance if self-employed?’, here’s your guide to the benefits that could help, in 2017.

Universal Credit (UC)

You may have heard about Universal Credit (UC), which is being rolled out across the UK in stages. Depending on your postcode, you may need to start claiming UC instead of many of the benefits in this article.

Need more guidance? Your local Citizens Advice Bureau will be able to help you work out whether UC applies to you yet (you can also use the handy UC postcode checker), and it’s important to do this first, before spending time applying for any other self-employed tax benefits.

Jobseeker’s Allowance (JSA)

Self-employed Jobseeker’s Allowance (JSA) can be an important benefit. Some people know it as ‘the dole’, others refer to ‘signing on’ but whatever you call it, it can be helpful if you’re on a low income, or out of work. Claiming JSA after being self-employed is possible, you just need to understand the category you fall into, and how to apply.

There are two types of JSA – contribution-based, and income-based. If you’re self-employed, you won’t be eligible for contribution-based JSA, as this type would depend on your Class 1 National Insurance Contributions (NICs). Being self-employed, you don’t pay these.

You may, however, be eligible for income-based JSA. This is means-tested, and an important benefit for self-employed people on low income. Whether you can get it will depend on your age, immigration and education status (part-time students generally won’t be eligible) and crucially, how many hours you’re working every week. If it’s less than 16 you could be eligible.

Remember, even if this is a self-employed job seeker’s benefit, if you’re living with a partner they’ll need to be working less than 24 hours a week in order for you to qualify.

Housing Benefit

Housing Benefit can help pay part or all of your rent if you’re on a low income. It’s one of the most important benefits for the self-employed, as the lack of a guaranteed monthly salary can make paying rent more precarious, along with saving up for emergencies.

Your living arrangements are important here. If you live with a partner, only one of you can get Housing Benefit, and if you’re single and under 35, you can only get it for bed-sit accommodation, or a single room in shared accommodation.

There are lots of other conditions and things to factor in, and the best place to read up is always gov.uk’s dedicated Housing Benefit page, for the latest guidance.

Get organised now though by having a clean copy of your accounts to hand, or the right details to complete a certificate of earnings form, as well as the Housing Benefits application form.

Working Tax Credit (WTC)

If you’re still working for more than 30 hours a week (it can be less depending on your age and circumstances), you may be entitled to the Working Tax Credit (WTC).

We’ve recently done an in-depth guide to the Working Tax Credits and tax benefits for the self-employed, which goes through this benefit in more detail. Set ten minutes aside and give it a read-through, it’s one of the key self-employed tax benefits for businesses in the UK.

Council Tax Reduction

Council Tax Reduction (also known as ‘Council Tax Support’) allows people on a low income to pay a reduced bill, making it another of our key benefits for the self-employed. You may even be eligible to stop paying Council Tax altogether.

The first thing to do is check how your local council manages this benefit on gov.uk’s website, using their postcode checker. You can apply for the benefit whether you own your home, rent, are unemployed or working, but eligibility and what you get will depend on your circumstances, household income, and whether anyone else lives with you.

Based in Northern Ireland? Here’s some advice on your separate scheme.

Child Tax Credit (and Child Benefit)

Self-employed tax benefits are important considerations for families, too.

Child Tax Credit

This is calculated on a number of factors including your income, how many children live with you, their age and whether any of them have a disability. You can get Child Tax Credit whether you’re employed, self-employed or unemployed. Check with gov.uk to see if you’re eligible for Child Tax Credit, and how yours will be worked out.

Child Benefit

A key benefit for families across the UK, you can get Child Benefit if you’re responsible for a child under the age of 16 (or 20, depending on their education status).

Again, this has its benefits for the self-employed, but you may have to pay a tax charge if your income (or your partner’s) is over £50,000.

Take a look at gov.uk’s Child Benefit overview, to understand what’s important when sorting out your Child Benefit arrangements.

Employment and Support Allowance (ESA)

If you’re unable to work because of an illness or disability, you may be able to claim Employment and Support Allowance (ESA).

This benefit depends on a number of factors, including age and income circumstances – the Citizens Advice Website lists everything you need to do on its ESA overview page, and you can also get clear guidance from your local Citizens Advice Bureau.

Pension Credit

Last but not least in our guide to self-employed tax benefits, if you’re above State Pension age you may be eligible for Pension Credit. Whether you’re a long way off or just round the corner from State Pension age, put it on your radar – it’s an important one for the self-employed.

Pension Credit is currently chopped into two parts – Guarantee Credit and Savings Credit. The first one tops up your weekly income if it’s below a certain threshold, whilst the extra Savings Credit is a payment for people who’ve saved some money towards their retirement.

That’s the current guidance, but it’s important to note that if you reached State Pension age on or after 6 April 2016, you probably won’t be eligible for the Savings Credit. Check what applies to you on the government’s Pension Credit overview.

This article is just for guidance. You should always seek independent, tailored advice, for example from your local Citizens Advice Bureau, before taking action.

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