Self-employment and benefits

Being self-employed can affect your benefits.

Grants for starting a new business

You may be eligible for New Enterprise Allowance if you’re over 18 and either:

  • you or your partner get Universal Credit (UC), Jobseeker’s Allowance or Employment and Support Allowance (ESA)
  • you get Income Support and you’re a lone parent, sick or disabled

Starting your own business (GOV.UK)

Support with the extra costs of being disabled

You can claim Personal Independence Payment (PIP), if you’re self-employed, employed or unemployed. PIP is meant to meet some of the extra costs of being disabled. It is not means-tested so it does not matter how much money you have.

You will have an assessment to work out how much help you need with mobility and daily living activities. Depending on how much help you need, you may get a higher rate of PIP.

Working might suggest that you can do things that you could not when you were assessed for PIP. You could have another assessment. This could reduce or stop your PIP payments.

Personal Independence Payment 

Benefits that depend on how much you earn

If you get ESA and you start earning over £131.50 or working for more than 16 hours a week, you may have to claim Universal Credit.

The amount you can claim depends on how much you earn and if you are also claiming Housing Benefit. Use a benefits calculator to see how much money you could get.

You can claim Employment and Support Allowance (ESA) and be self-employed if you are doing ‘permitted work’. To qualify, you need to be working for less than 16 hours a week. Your average net profits also need to be less than £131.50 a week. Talk to your work coach if you want to do permitted work.

Employment and Support Allowance

Universal Credit

To claim Universal Credit, you have a claimant commitment which describes what you and your partner must do. You will have a Work Capability Assessment to see how your condition or impairment affects your ability to work. There are 4 groups with different requirements:

  • work search requirement
  • work preparation requirement
  • work focused interview requirements
  • no work requirements

Your work coach may ask you to prove that your work is useful and productive to claim Universal Credit. The Department for Work and Pensions (DWP) call this 'gainful' employment. They'll ask about your:

  • clients
  • suppliers
  • appointments
  • business plan

‘Work search requirement’ group

If you’re in this group, you must prove that your self-employment is ‘gainful’.

Your Universal Credit will depend on what you earn in the first 12 months. The DWP call this the ‘startup’ period.

After 12 months, Universal Credit assumes you are earning national minimum wage at 35 hours a week no matter how much you earn. This is called the ‘minimum income floor’.

These 12 months begin when you start your business, not when you start claiming Universal Credit.

If you earn less than this threshold – perhaps because your work is seasonal or changes from month to month – your Universal Credit will not make up the difference. But if your monthly earnings are above this level, your benefits will reduce.

If you have another job as well as being self-employed, your earnings may be deducted from your Universal Credit payments.

‘Work preparation requirement’ group

In this group you must do 'work-related activity' to help prepare you for work. Developing a business plan can count as work-related activity if your work coach agrees that your self-employment is 'gainful'.

Your Universal Credit will depend on what you earn.

'Work-focused interview requirements' group

You need to go to interviews at Jobcentre Plus to talk about your plans for returning to work. You do not have to look for work or do work-related activities.

Your Universal Credit will depend on what you earn.

‘No work requirements’ group

You can be self-employed and you’re not expected to look for other work. You can claim Universal Credit, which will be calculated using what you earn.

Ask questions about benefits or work

Contact the Scope helpline

Ask a question on Scope’s online community

Last reviewed by Scope on: 24/04/2018

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