Claiming benefits if you are self-employed in the UK

What benefits can I get if I am self-employed?

If you are self-employed but on a low income, you might be eligible for Universal Credit. Universal Credit was introduced in 2013. It aimed to simplify the way in which UK state benefits were calculated and received. You need to apply separately in Northern Ireland.

What is Universal Credit?

Universal Credit is a single monthly payment that replaces six benefits:

• Housing Benefit
• Child Tax Credit
• Income Support
• Working Tax Credit
• Income-based Jobseeker’s Allowance
• Income-related Employment and Support Allowance

People already on these benefits are being moved over to Universal Credit. You can’t make new claims for these older benefits anymore.

How does Universal Credit work if you are self-employed?

Benefits for self-employed workers are calculated in a similar way as for employees. In both cases, the amount of Universal Credit you can get will depend on:

1. Your circumstances
2. Your income

For example, the monthly standard amount for a single person aged over 25 is £393.45. You can read more about Universal Credit payment amounts in our guide to Universal Credit. If you are self-employed, the amount of Universal Credit you get might change each month.

The Department for Work and Pensions (DWP) will check if you’ve earned more or less than it expects you to earn. Then it will alter your payment accordingly. The amount the DWP expects you to earn each month is called your ‘minimum income floor'.

Understanding your Universal Credit entitlement

Understanding your Universal Credit entitlement can be a challenge. There are three different pages of government advice and they each says something slightly different:

• Universal Credit
• Self-employment and Universal Credit
• Guidance: Claiming Universal Credit when you are self-employed

We have summarised it below.

Eligibility criteria for Universal Credit for the self-employed

You can only get benefits if your work is ‘gainful self-employment’. To tell the DWP about this, you will need to attend an interview and provide certain evidence.

What is a gateway interview for Universal Credit?

If you are self-employed and apply for Universal Credit, you’ll need to go to a ‘gateway interview’ at a Jobcentre Plus office. This is sometimes called a ‘self-employed interview’. At the interview the assessor will ascertain if you are gainfully self-employed. If you cannot show this, you will be asked to look for other work.

The DWP considers you gainfully self-employed if your work is:

• Your main job or main source of income
• Organised (you keep receipts and invoices)
• Developed (you have a business plan or are advertising your services)
• Regular (you have steady work coming in)
• Expected to make a profit

What do I need to bring to my interview?

You will be told what kind of evidence and documentation you need to bring to the interview to prove you are gainfully self-employed.

This might include things like:

• Receipts
• A business plan
• Trading accounts from previous years
• Proof you’re registered as self-employed with HMRC (your unique taxpayer reference)
• Your VAT registration number, if you have one
• Records of customers, suppliers or contracts
• Evidence of your business activities
• Bank statements
• Past tax returns

If you don’t show enough evidence, the assessor might decide you’re not gainfully self-employed. This would mean you’d need to look, and be available, for other work to get Universal Credit.

What is the minimum income floor?

Universal Credit for self-employed workers is calculated using the ‘minimum income floor’. This is the amount of money an employed person in a similar role would take home if they were on the National Minimum Wage. It’s their take-home pay after tax and National Insurance.

If you earn more than this amount, the DWP will calculate your Universal Credit payment using your actual earnings that month. If you earn less than the minimum income floor, one or more months, your payment will be calculated using the minimum income floor. You may also be encouraged to find more work.

What is a self-employed start-up period?

A start-up period is up to 12 months when you can focus on growing your business. During this period you won’t have to look for, or be available for, other work. Your assessor will decide if you’re eligible for a start-up period.

During a start-up period, your Universal Credit payments will be calculated using your actual earnings, not the minimum income floor. You can also get support from a work coach who’s trained to work with self-employed people.

What information do I need to provide?

To claim Universal Credit when you are self-employed, you need to keep an accurate record of the following:

• Your business income
• Your business expenses

You’ll need to report this information via your Universal Credit online account each month. You must report both income and expenditure accurately and report any changes. If you provide the wrong figures, you may be sanctioned and have to repay benefits.

How do profit and loss work?

How much you have billed for, or been paid, is not profit. You must first take off your costs. Your costs might be travel expenses, materials or tools. You might have to have insurance or pay an accountant. You will pay National Insurance too.

If there is money left over after all your expenses, you have made a profit. If you have paid out more than came in, you have made a loss.

Your earnings may go up or down. If you make a loss, the loss will be carried over until you make a profit. You may get more Universal Credit until the loss has been covered. But if you make regular profit, that too may be carried forward to cover periods where you work less or are not paid as much.

You will have a limit to the amount you can earn before you receive no Universal Credit for that month. If you earn £2,500 or more over your limit then:

1. You won’t get any Universal Credit
2. The amount over £2,500 will be counted as earnings in the next assessment period

What happens if I have a partner?

If you live with your partner, you need to make a joint claim for Universal Credit. Your partner’s earnings will affect how much Universal Credit you get. This applies whether they are employed or self-employed.

What happens if I am both employed and self-employed?

You might have a PAYE job as well as being self-employed. In this situation, your Universal Credit payment will be calculated based on your combined earnings from self-employment and employment.

Applying for benefits when self-employed

Applying for benefits when self-employed should be straightforward.

Application process overview

You can apply for Universal Credit online. To complete your application, you’ll need an email address and to set up a username and password. You’ll then be sent a one-time passcode to your mobile phone.

The date you submit your Universal Credit application is called your ‘assessment date’. It will be the day in the month your money is paid. For example, if you submit your application on 11th July, you will be paid on the 11^th of every month.

Step-by-step application process

1. Create a Universal Credit account and make a note of your Universal Credit login.
2. If you live with a partner, they will need to create a Universal Credit account. too. You'll be sent a code to link the accounts together.
3. Submit your claim within 28 days of creating your account.
4. Attend an interview with Jobcentre Plus. You'll be told how to arrange this after you submit your claim. It should be within 10 working days.
5. If you have a disability or health condition, you may need to complete a ‘work capability assessment’.
6. If necessary, apply for an advance of your first Universal Credit payment.
7. Your first payment should arrive five weeks after you submit your claim.
8. Report your income and expenses to the DWP each month, as advised.
9. Update your account if your circumstances change.

Report any changes in your circumstances

You’ll need to report any change in circumstances to the DWP. You do this via your online Universal Credit account. Things you need to notify the DWP about include if you:

• Close your business
• Start a different kind of business
• Take a permanent job
• Are no longer able to work

Can I claim any other benefits?

You might be able to get other benefits in addition to Universal Credit. You can use a benefits calculator to find out about benefits you might get while self-employed.

If you are sick

If you need self-employed sickness benefit, you can’t claim Statutory Sick Pay. You might be able to claim new style Employment and Support Allowance (ESA). This is dependent on having made sufficient National Insurance contributions.

If you can’t pay your mortgage

A Support for Mortgage Interest Loan (SMI) can help you pay your mortgage interest.

If you are on a legacy benefit such as income-related Employment and Support Allowance (ESA), you might be able to claim SMI. But if you get Universal Credit, you can only claim SMI if you have no earned income at all.

If you have a baby

You can usually claim self-employed Maternity Allowance if you take time off to have a baby. You may be able to claim extra help when you have your baby. Other help includes Healthy Start vouchers and a Sure Start Maternity Grant.

If you have children

You might be entitled to Child Benefit if you’re responsible for one or more children under the age of 16. Child Benefit is worth £25.60 a week for the oldest or only child. It’s then £16.95 for each additional child, in the 2024/25 tax year.

You might also be able to get Child Tax Credit. To do so, you’ll need to have claimed it in the past year or be claiming Working Tax Credit. Tax credits for workers and self-employed tax credits are being replaced by Universal Credit.

If you have a disability

Personal Independence Payment (PIP) is a disability benefit for people aged between 16 and State Pension age. You can get PIP even if you work or claim most other benefits.

Impact on your business and personal finances

Being self-employed can make it more difficult to manage your personal finances. This is especially true if your income goes up and down each month.

Tips for managing your finances include:

1. Keep your business and personal finances separate.
2. Put sufficient money aside for your tax bill.
3. Save money to cover periods when you are sick or on holiday.
4. Put money aside in busy months, to cover slower months.
5. Try to save money on your household bills.
6. Make a budget. Read ‘How to budget for an irregular income’, ‘How to budget your money’ and ‘How to save money’.

Tips for maximising your benefit claims

Tips for maximising the benefits you receive include:

• Use a benefits calculator to find out about benefits you might get while self-employed
• Tell the DWP about any changes to your circumstances. Changes might be personal (you got married or divorced, or had a baby) or business-related (you do PAYE work too)

Myths about self-employment and benefits

It is a myth that you cannot claim benefits if you are self-employed. This is largely untrue. You can claim Universal Credit if you are self-employed, assuming you provide the DWP with the necessary information.

However, you cannot claim Statutory Sick Pay or Statutory Maternity Pay. These are benefits for employees.

Challenges faced by self-employed individuals

Freelancers and sole traders often struggle to pay their tax bills. If you’re self-employed, you will normally need to complete a tax return. Self-assessment tax payments are due on or before 31 January and 31 July each year.

Ideally, if you are self-employed, you will set aside the money necessary to pay your tax bill. But if you don’t have enough money, you may be eligible for support through HMRC’s Time to Pay service. This allows you to pay your tax bill in instalments.

Additional support and resources

During the Covid-19 pandemic there was additional self-employment government support and financial aid for freelancers. This included the Self-Employed Income Support Scheme, which was a government grant for the self-employed. But Covid support has now ended.

Summary: navigating the benefits system as a self-employed person

If you are self-employed you might be able to claim Universal Credit to top up a low income. To do so, you’ll need to provide the government with certain ongoing information about your self-employed work.

There is plenty of advice and help available online for self-employed workers. This can help you not just with benefits but how to set up a business, expand and manage your taxes.