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How Universal Credit works if you're self-employed

This advice applies to England

Warning
If you're self-employed, you can only apply for Universal Credit in certain postcode areas.

Use the postcode checker to see if you live in one of these areas.

If you don't live in one of these areas you'll need to check what other benefits you can get or get help from your nearest Citizens Advice.

What counts as self-employed

You'll only be able to apply for Universal Credit as self-employed if all the following apply:

  • self-employment is your main job
  • you get regular work from self employment
  • you can show your work is organised, eg you have invoices and receipts, or accounts
  • you expect to make a profit

If you can't show that you're self-employed, you might have to look for other work (ie not self-employed work) while you get Universal Credit.

GOV.UK has useful information on how to set up as self employed - this can help you get set up before you apply for Universal Credit.

Get help

The Eligibility rules for benefits can be complicated. If you're not sure what you should be applying for, you can talk to an adviser at your nearest Citizens Advice.

How much you'll get

The amount of Universal Credit you get will depend on your circumstances, eg whether you're in a couple or single, or whether you have children or other dependants.

Use the entitledto benefits calculator to find out how much you could get.

If you've been self employed for over 12 months when you apply

Your Universal Credit payments will be based on the assumption that you're earning a certain amount through self employment, even if you don't actually earn this much. This assumed amount is called the ‘minimum income floor’.

Your minimum income floor will be worked out when you apply for Universal Credit.

Example

Sam is 22, single and works as a self employed painter, so he’d be expected to work 35 hours a week. This is used to calculate Sam’s expected monthly income, using the minimum wage for his age group of £7.05:

35 hours x £7.05 = £246.75 per week
£246.75 x 52 weeks = £12,831 per year
£12,831 ÷ 12 months = £1,069.25 per month

The Department for Work and Pensions (DWP) will deduct a notional amount from Sam's expected monthly income for tax and national insurance. In this case, the amount is £70.

This would make Sam's expected monthly income, after deductions, £999.25 per month. This amount is Sam’s ‘minimum income floor’ - every Universal Credit payment is based on the assumption that Sam makes £999.25 per month, even if Sam has a slow month and only makes £200.

If Sam has a good month and earns £1,300, his Universal Credit will be based on his actual income rather than the minimum income floor.

Some people will be exempt from the minimum income floor, eg if you're a lone parent of a child aged under 5 or caring for a severely disabled person - you'll discuss this with the Jobcentre during the application process. You're also exempt if you've been self-employed for less than 12 months.

The minimum income floor means that you'll get the same amount of Universal Credit even if you make far less than your minimum income floor. So you might have to look for other work to supplement your total income.

If you've been self-employed for less than 12 months when you apply

If you've been self-employed for less than 12 months, the minimum income floor won't apply to you - your payments will be based on what you actually earn through self employment. This is called a ‘start-up period’.

After 12 months, your Universal Credit will be reduced if your earnings are less than your minimum income floor.

You’ll need to try to build your business up as much as possible during the start-up period - GOV.UK has useful advice on how to build a new business.

If you're thinking about self-employment for the first time

If you've never been self-employed before but would like to be, the amount of Universal Credit you'll get for your first year will be worked out using your actual earnings (because the minimum income floor won't apply). But you'll need to set yourself up as self-employed before you apply.

The minimum income floor will start after your start up period of 12 months runs out (from the time you apply) - so your Universal Credit payments could go down at that time if your actual earnings are lower than the minimum income floor.

After you apply

You'll have to go to an interview at a Jobcentre - this is called a 'gateway interview'. The online application system will let you know how to book once you've done your application.

When you go to the interview you'll need to show that you're self-employed, so you need to take things like:

  • your business plan - GOV.UK has guidance on writing a business plan if you don’t have one
  • invoices
  • receipts
  • accounts
  • proof that you’re registered as self-employed with HMRC

You might not need all these documents, but you should take enough to show that you are (or intend to be) working as self employed.

Warning
If you don't take enough evidence, the person interviewing you might decide that you don't qualify as self-employed, meaning you might have to look for other work while you get Universal Credit.

Prepare for your interview.

Report your earnings

You’ll have to report your earnings monthly when you start getting Universal Credit payments. The Jobcentre should tell you how to do this.

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