Universal Credit - Business Owners

Guide to universal credit

Universal Credit can provide financial support for self-employed individuals and directors who are on a low income. If you think you may be eligible, you can apply online and provide evidence of your income and business expenses. 

Here is a simple guide to Universal Credit:

1. Eligibility: To be eligible for Universal Credit, you must be 18 years of age or over, and either working fewer than 16 hours a week or be actively seeking work. Self-employed, individuals and directors who are earning less than a certain amount may also be eligible to claim universal credit. In the case of a universal credit claim , directors of small limited companies are treated as  self-employed.
   
   

2. How to apply: You can apply for Universal Credit online through the government's official website. You will need to provide information about your income, savings, and living situation, as well as information about any other benefits you are receiving.
   
   

3. Evidence of income: A self-employed individual will need to provide evidence of income, such as your most recent self-assessment tax return or a profit and loss statement. You will also need to provide evidence of your business expenses.
   
   

4. Assessment period: Universal Credit is calculated based on an assessment period of one calendar month. Your earnings from the self-employment in that period will be used to calculate your Universal Credit award.
   
   

5. Reporting changes: If your self-employed income changes, you must report this to the Department for Work and Pensions as soon as possible. This is important because your Universal Credit award will be adjusted accordingly.
   
   

6. Payment: Universal Credit is paid monthly in arrears, directly into your bank account.
   
   

7. Additional support: If you need additional support, such as help with housing costs or disability-related expenses, you may be eligible for additional elements of Universal Credit.

Regular reporting of changes to your self-employed income is important to ensure that your universal credit award is calculated correctly.

Minimum income floor

The minimum income floor (MIF) is a calculation used in the Universal Credit system to determine the minimum amount of income that a self-employed person is assumed to earn. The MIF is intended to reflect the amount that someone working in similar circumstances to the claimant would earn if they were employed.

1. MIF calculation: The MIF is calculated by taking the National Minimum Wage for the claimant's age group and applying it to the number of hours they are expected to work each week (based on their availability for work). The MIF is then adjusted to take into account the claimant's business expenses.
   
   

2. Lower earnings calculation: If a self-employed claimant's actual earnings are lower than the MIF, their universal credit award will be calculated based on the MIF instead of their actual earnings. This means that even if the claimant's self-employment income is low, they may still receive a universal credit award that is higher than their actual earnings.
   
   

3. First year of self-employment: The MIF does not apply to self-employed claimants who are in their first year of self-employment. 

The minimum income floor is a calculation used in the universal credit system to determine the minimum amount of income that a self-employed person is assumed to earn. 

This calculation is used to ensure that self-employed claimants receive a Universal Credit award that is consistent with the amount that someone working in similar circumstances would receive if they were employed.

How to start a claim

Here are the general steps to claiming Universal Credit as a self-employed person:

1. Check your eligibility: To claim Universal Credit as a self-employed person, you must meet certain eligibility criteria. For example, you need to be over 18, have low income and savings, and be a UK resident.
   
   

2. Prepare your documents: You will need to gather some documents to support your application, such as proof of your self-employment, business accounts, and bank statements.
   
   

3. Start your application: You can apply for Universal Credit online. The application process will take you through a series of questions about your personal and financial circumstances.
   
   

4. Declare your self-employment: During the application process, you will need to declare that you are self-employed and provide information about your business, such as your earnings and expenses.
   
   

5. Attend a work coach appointment: Once you have submitted your application, you will be asked to attend an appointment with a work coach. They will discuss your work commitments and help you create a work plan.
   
   

6. Provide monthly updates: After your initial claim, you will need to provide monthly updates about your self-employment income and expenses. You will need to report this information on your online account.
   
   

7. Review your claim regularly: It is important to regularly review your claim to make sure that you are receiving the correct amount of support. You can do this through your online account.
   
   

8. Consider other support: Depending on your circumstances, you may be eligible for other forms of support, such as a self-employment income support scheme or a business grant. Check the government website for more information.
   
   

Please watch the 'account set-up' instructional video for detailed instructions.

Please watch the 'making an online claim' instructional video for further instructions.

Please watch the 'claiming if you're a couple' instructional video to get further details about claiming as a couple.

Alternatively, you can read the entire PDF guide.