CLAIMING UNIVERSAL CREDIT AS A SELF-EMPLOYED CLAIMANT This briefing is designed to give an overview on how to claim Universal Credit claim as a self-employed claimant only. Should you require more detailed information on this or any other social security issue, please contact Equity’s Tax and Welfare Rights Advice and Rights Helpline on 0207 670 0223 or email [email protected] The helpline is open on Mondays and Thursdays from 10.00 am – 1.00 pm and 2.00 – 5.00 pm. What is Universal Credit? Universal Credit is a means-tested, tax-free benefit which replaces income support, income- based JSA, income-related Employment Support Allowance, Housing Benefit and Tax Credits (Child Tax Credits and Working Tax Credit). It is planned that existing claims of most means- tested benefits and tax credits will be transferred to UC from 2020. Universal Credit does not replace two key income replacement benefits that are based on your national insurance contributions. These are contribution-based Jobseeker’s Allowance or contributory Employment Support Allowance. For more information on these benefits, please see our briefing sheet ‘Claiming new Style JSA and ESA.’ If you are in receipt of contribution-based benefits, and liable to pay rent, you will still need to claim Universal Credit Housing costs (formerly Housing Benefit). Universal Credit does not cover Council Tax costs. For help towards council tax payments, you will need to claim Council Tax Reduction from the local authority (formerly Council Tax Benefit). Capital Note: that if you have savings above £16,000 you will not qualify for Universal Credit. If you have savings between £6,000 and £16,000 then the DWP will assume a monthly income from savings of £4.35 per month for every £250 above £6,000 and add that to any other income. Two child-limit Anyone who is responsible for a child born on or after 6 April 2017 will not receive the child element of UC for that child unless there is no more than one child already on the claim or an exception applies. For more information about the exceptions, see https://www.entitledto.co.uk/help/Exemptions_to_2_child_limit 2018-19 1 Do I qualify? The basic qualifying conditions for Universal Credit are as follows: You or your partner have to be aged at least 18 and under State Pension Credit qualifying age (see below) and You must not be in full-time education (see below) and Not be subject to immigration control (see below) and Have accepted a claimant commitment (see below) State Pension Credit qualifying age The current position If you or your partner have reached State Pension Credit qualifying age, you will need to claim Pension Credit instead of Universal Credit, and will generally be better off financially by doing so. To check your State Pension Credit age see https://www.gov.uk/state-pension- age/y. To claim State Pension Credit, go to https://www.gov.uk/pension-credit. If you are also liable for rent, you can claim Housing Benefit from your local authority. The position from 15 May 2019 On 14th January 2019 the government announced that from 15 May 2019 mixed age couples, where one has reached state pension age and the other is of working age, will be unable to claim pension credit but will have to claim Universal Credit or legacy benefits if they are still available in your area (legacy benefits including jobseeker’s allowance, housing benefit and tax credits). Those who are already receiving pension credits or pension-age housing benefit will continue to do so while they remain entitled to either benefit. Full time education This generally means a non-advanced education course of 12 hours or more if you started it before you were 19 (e.g. A levels) or on a full-time advanced course which means above the level of A level or advanced GNVQs. Immigration Control You are subject to immigration control if you are not a European Economic Area (EEA) national and you require leave to enter or remain in the UK or you have been given leave but subject to the condition not to have recourse to public funds. You also need to be ‘habitually resident’ in the ‘common travel area’ which is the UK, Channel Islands, the Isle of Man and Republic of Ireland – if you are self-employed and resident in that area you should satisfy that requirement but if you are refused Universal Credit due to not being ‘habitually resident’, please contact us for further advice. 2018-19 2 Claimant Commitment The claimant commitment is a record of your responsibilities while you are claiming benefit. It includes the work-related requirements you must meet in order to continue to receive UC. Work-related requirements includes things like going to interviews about possible work with the DWP, work preparation, actual work searching and being available for work (see below). How you are paid Universal Credit is assessed over a monthly ‘assessment period’. The assessment period is one calendar month beginning with the first date of entitlement to Universal Credit e.g. 14th January to 13th February. Because UC bases awards on your monthly income there may be a delay of at least five weeks before you get your first payment. This is because UC is not paid for the first 7 days for most claims, and it is also paid a month in arrears. You can request an ‘advance payment’ of UC if this is going to cause you financial hardship or other problems e.g. rent arrears. It is advisable to do this as soon as possible during the first assessment period, because if you delay until within three days of the end of the assessment period, you may not be able to get an advance unless you have transferred to UC from another benefit. To claim an advance payment of UC, call the UC helpline on 0800 328 5644. The maximum you can claim as an advance is 100% of the estimated UC payment. This amount is repayable over a maximum period of twelve months. The repayment rate is limited to 15% of your ‘standard allowance’ (see below) or 25% if you have earnings. How is a Universal Credit award calculated? Awards are worked out by firstly looking at the maximum you could claim which is made up of the ‘standard allowance’ and then adding any elements that apply e.g. if you have a child, you will get a child element or if you rent you will get a housing costs element. There are also elements that cover childcare costs, disability and being a carer. Once you have worked out the maximum allowance, you add up any earnings during the relevant assessment period (which with Universal Credit is always a period of one month – see below) and then, if you are self-employed, deduct from this what are called ‘permitted expenses’ which are similar but not exactly the same as those allowable for tax purposes (permitted expenses are explained further below). If you are allowed a ‘work allowance’ that can be deducted from your net earnings figure. A work allowance can apply when you or your partner are responsible for a child or have limited capability for work due to a disability. You then look at any other income received in the assessment period and add that up and then your net earnings and other income figure is deducted from the maximum UC amount. Only 63% of the net earnings figure (after any work allowance deduction) is deducted – this is known as the ‘taper’. 2018-19 3 A simple example – an employed (PAYE) worker Claiming UC as an employed PAYE worker is usually more straightforward than if you are self-employed. In this example, Jenny is a part-time teacher aged 35 with net PAYE earnings of £950 per month. She lives on her own and rents a flat for £600 per month. Her maximum award would be calculated as follows: Standard Allowance (single claimant aged 25 or over) £ 317.82 Housing Costs element £ 600.00 Maximum UC award £ 917.82 Less 63% of earnings £ 617.50 UC award £ 300.32 If Jenny were to lose her job and not receive any earnings, her UC award would look like this: Standard Allowance (single claimant aged 25 or over) £ 317.82 Housing Costs element £ 600.00 Maximum UC award £ 917.82 Less 63% of earnings £ N/A UC award £ 917.82 Claiming Universal Credit You claim Universal Credit online at www.gov./apply-universal-credit. During the claiming process you are asked a number of questions about your age, residence status, household, housing costs, etc. If you need help with claiming online you can phone the Universal Credit helpline on 0800 328 5644. Self-employment claims As part of the UC claiming process, you will be asked about your employment status - whether you undertake employment work, self-employment work or both. Most entertainers work on a self-employment basis. Gainful Self-Employment (GSE) If you are usually self-employed, the DWP apply a test to see whether you are ‘gainfully self- employed.’ You are gainfully self-employed if the following applies (regulation 64, UC regs 2013): 2018-19 4 1. Your self-employment trade, profession or vocation is your main employment; 2. Your earnings from your trade, profession or vocation are self-employed earnings; and 3. Your self-employment is organised, developed, and regular and carried on in expectation of profit. All three conditions must be satisfied in order for a determination of GSE to be made.