Benefits and the self-employed

As the recession has continued to bite, many self-employed people have found themselves struggling to find work – but also struggling to persuade the state that they are entitled to benefits.

Here, we look at some of the key benefits on offer, and how they are impacted by self-employment.

Jobseeker’s Allowance

Jobseeker’s Allowance (JSA) is perhaps the most important out of work benefit. Some people know it as the dole; many others refer to ‘signing on’. For most people, JSA is amongst the most fundamental aspects of the welfare system – and yet many self-employed people are not entitled to claim it.

There are two types of JSA: contribution-based, and income-based. Eligibility for contribution-based JSA is contingent on Class 1 National Insurance Contributions (NICs) – which self-employed people do not pay. You will therefore not be entitled to contribution-based JSA.

Income-based JSA, however, is means tested. It is available to those with savings below £16,000 – but you should understand that you are unlikely to be entitled to this benefit if your partner is working more than 24 hours a week.

Your local Citizens Advice Bureau will be able to help you work out whether or not you are entitled to income-based JSA.

Employment and Support Allowance

If you are unable to work because of an illness or disability, you may be able to claim Employment and Support Allowance (ESA). This benefit is available to those who are under the State Pension age, and whose ability to work has been affected for at least four consecutive days, or who have been unable to work for two out seven consecutive days.

Working Tax Credit

If you are still working for more than 30 hours a week (or 16 hours a week if you are 60 or older, or if you have a disability), you may be entitled to the Working Tax Credit – a non-taxable payment from the government.

Your entitlement to the Working Tax Credit depends on the number of hours you are working, and the amount you are earning. The amount you receive will also depend on factors like the number of dependent children you have, and whether or not you are in a couple.

There is no set income limit for Working Tax Credits, as eligibility depends on your circumstances and those of your partner, if you have one. However, there are indicative limits of £18,000 for a couple without children, or £13,100 for a couple with children. The limit may be higher if you have children.

You can find out whether or not you are entitled to the Working Tax Credit in principle by completing the questionnaire on the HMRC website. You should note, however, that because the entitlement and the award are so contingent on circumstance, the amount you receive will only be confirmed once you make a formal application.

Other benefits

Finally, you should remember that there are several other benefits to which you might be entitled as a self-employed person. Of these Housing Benefit is perhaps the most important. Housing Benefit is available to those on low incomes and with savings of less than £16,000. The amount you receive will depend on where you live, and on the size of your property. Your Local Authority will be able to help you determine whether or not you qualify.

You might also qualify for Council Tax Benefit which helps, unsurprisingly, with the cost of Council Tax. Your entitlement will depend on your income, whether or not you have a partner, and whether or not you have children. Again, your Local Authority will be able to help you determine whether or not you qualify.

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

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