Starting your own business is exciting, but it also means keeping DWP in the loop
Universal Credit is a monthly payment from the Department for Work and Pensions (DWP) to help people on a low income with daily living costs, whether they are in or out of work.
The means-tested benefit can also be claimed by the self-employed, providing an essential source of income when starting or growing your own business.
Taking the self-employment career path can be rewarding and exciting. However, it also means keeping the DWP in the loop to protect your entitlement to Universal Credit and avoid any financial penalties.
The key thing to remember, whether you’re a small start-up or turning a side hustle into your dream venture, is to accurately report your earnings and expenses to the DWP at the end of each monthly assessment period.
You must do this even if Universal Credit does not class you as “gainfully self-employed”, or you did not have any income or expenses that month.
It is important to report your work status so that you get the correct amount of Universal Credit and avoid any under or overpayments.
Income from side hustles
If you only sell items occasionally and are not trading – for example, listing unwanted personal belongings on platforms such eBay or Vinted – you do not need to report this as income, but the money generated will need to be reflected in the amount of capital that you have and therefore report to DWP.
However if you are ‘trading’ (this may also include using such online platforms such as Vinted and eBay), you need to report your earnings as income for each relevant assessment period.
You are generally classed as ‘trading’ if you:
- sell regularly to make a profit
- make goods to sell for profit
- sell online, at car boot sales or through classified adverts regularly
- earn commission from selling goods for other people
- are paid for a service you provide
You must report all income from trading at the end of each assessment period, no matter how much you earned.
Keeping business records
If you are running a business, you should keep records for Universal Credit and HM Revenue and Customs (HMRC).
You will need to keep an accurate record of:
- income, or any payments into your business, including cash payments
- expenses, or any payments you made from your business, including cash payments
You must be able to show evidence of the business income and expenses you report. You may be asked to show this evidence to the DWP.
Examples of evidence include:
- receipts
- invoices
- bank accounts
This evidence helps ensure you get the right amount of Universal Credit. If you don’t supply evidence when asked, your claim may be affected.
Reporting your self-employed income
You must report all self-employment business income for the dates DWP asks you about. Report everything you were paid during that time, no matter when you did the work to earn it.
This includes:
- any payments for goods or services made by credit or debit card, cash, cheque or bank transfer
- any goods or services as payment (report what you would have charged the customer if they had paid money for your work)
- any tips or gratuities
- any income tax or National Insurance refunds related to your self-employed business
- any grants or subsidies, if they are treated as taxable income by HMRC
- the sale or transfer of business assets that have previously been declared as an expense
Remember, you should only report income that is directly related to your business.
Reporting your self-employed expenses
You must report all self-employment business expenses for the dates of your assessment period – whether you are ‘gainfully’ self-employed or not.
All expenses must have been incurred wholly, exclusively and reasonably for the purposes of the business or trade within the current assessment period.
This means that they must be:
- appropriate to the business
- necessary to the business
- not excessive
Further detail about the expenses that may be claimed can be found on the government website.
Tell DWP if something changes
You can use your online Universal Credit account to report any change in your situation if it affects your self-employed work.
Tell DWP if you:
- close your business
- significantly and continuously reduce the amount of self-employed work you do or how much you earn
- significantly and continuously increase the amount of self-employed work you do or how much you earn
- are no longer able to work
- start a different business
- take employed work
You must also tell HMRC about any change to your business.
