Self-employment and Universal Credit

Providing information about your earnings 

Everyone claiming Universal Credit needs to report their self-employed earnings at the end of each monthly assessment period. This includes company directors, even those paying themselves by PAYE. 

You will need to report payments into and out of your business in the assessment period. This includes: 

  • total amount your business received 
  • how much your business spent on different types of expenses, such as travel costs, stock, equipment and tools, clothing and office costs 
  • how much tax and National Insurance you paid 
  • any money you paid into a pension 

What type of work counts for Universal Credit 

All work is taken into consideration for Universal Credit. If you are expected to look for and be available for work, then it needs to be identified whether you are ‘gainfully self-employed’. 

Gainful self-employment means that: 

  • your main employment is self-employment 
  • you have self-employed earnings 
  • your work is organised, developed, regular and in expectation of profit 

You must provide evidence about your business and earnings to your work coach, for example your: 

  • tax returns, accounts and any business plan 
  • Unique Taxpayer Reference (UTR), if you are registered for Self Assessment 
  • customer and supplier lists, receipts and invoices 
  • marketing materials 

If you are gainfully self-employed you are exempt from job search responsibilities and can concentrate on growing your business and earnings. 

If you are not gainfully self-employed, you will need to look for other work. You still have to report any earnings from your self-employment. You can ask to be reassessed in the future. 

How your Universal Credit payment is worked out 

If you are gainfully self-employed, your Universal Credit payment may be calculated using an assumed level of earnings, called a Minimum Income Floor. 

It is based on what an employed person on minimum wage would expect to earn in similar circumstances. 

If you earn more than this, then your Universal Credit amount is based on your actual earnings. 

If you earn less, the Minimum Income Floor is used to work out how much you can get. You may need to look for additional work to top up your income. 

If you are both self-employed and employed 

Your Universal Credit payment will be worked out using your combined earnings or any applicable Minimum Income Floor, whichever is higher.  

If you are newly self-employed 

If you are within 12 months of starting your business, you may be eligible for a start-up period of up to 12 months.  

During your start-up period your monthly earnings are used to work out your Universal Credit and the Minimum Income Floor does not apply. You will also receive support from a work coach who is trained to work with the self-employed.  

You will need to attend quarterly appointments with your Work Coach, providing evidence to show that you are still gainfully self-employed and actively taking steps to build your business.  

You are only entitled to one start-up period, unless it has been more than five years since your previous one, and you have started a completely different type of self-employment.  

Reporting changes in your circumstances 

You will need to report any change in circumstances, for example if you: 

  • close your business 
  • start a different kind of business 
  • take a permanent job 
  • are no longer able to work 

Depending on the change, your gainful self-employment may need to be reassessed.