Self-employment and benefits

You can claim Personal Independence Payment (PIP) if you are 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

If you get ESA and you start earning over £195.50 or working for 16 hours or more a week, you may have to claim Universal Credit.

The amount you can claim depends on how much you earn and your circumstances.

Use the Turn2us benefits calculator to see what you are entitled to.

To check which type of ESA you receive, you can:

• check your award letter or
• phone the Jobcentre to ask.

You can claim Employment and Support Allowance (ESA) and be self-employed if you are doing ‘permitted work’. Talk to your work coach if you want to do permitted work.

Employment and Support Allowance

How many hours you can work

To qualify for permitted work, you must work for less than 16 hours a week.

This can be an average if your hours vary week to week. The DWP will try to find a pattern in your hours and take an average. If there is no pattern in the hours you work, DWP normally take an average over 5 weeks.

How much you can earn

When you claim ESA, you can earn up to £195.50 net profit a week.

Report your hours and earnings to the DWP

The DWP will want to know the hours you work and how much you are earning. They will use this information to check you are still eligible for ESA.

If you have been trading for over a year, they will assume your earnings are the same as the previous year.

If you have been trading less than a year, DWP will decide on the information you can provide.

If your earnings change, let DWP know.

Self-employment will not affect ESA as long as it is within the permitted work limits. 

If you go over the permitted work limits, your ESA would stop.

Self-employment and ESA assessments

Being self-employed will not automatically trigger another assessment. 

But the work you do should not exceed what your current ESA assessment says you can do.

When you are reassessed, they might mention your self-employment work.

To claim Universal Credit, you have a claimant commitment. This describes what you must do.

Applying for Universal Credit

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 will ask about your:

• clients
• suppliers
• appointments
• business plan

Work allowance

Some people are entitled to a work allowance. Any earnings over the work allowance will reduce your Universal Credit.

Work allowance for Universal Credit (entitled to)

If you are 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 'start-up' period.

If you have another job as well as being self-employed, your Universal Credit will be based on all your earnings.

Minimum income floor

Universal Credit may assume that you are earning national minimum wage at 35 hours a week if you earn less than this. This is called the 'minimum income floor'.

This does not apply until after your 12-month start-up period. Ask your work coach about this. They might be able to extend this.

The minimum income floor applies if you:

• are in the all-work requirements group
• are gainfully self-employed
• have already had your 12-month start-up period

People with limited capability for work (LCW or LCWRA) should be exempt from the minimum income floor.

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.

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.

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

People with limited capability for work (LCW or LCWRA) should be exempt from the minimum income floor.

Some benefits are taxable. This means you pay Income Tax on them. Some benefits are tax-free. Self-employed earnings and taxable benefits will affect the amount of Income Tax you pay.

Tax-free and taxable state benefits (GOV.UK)

You may need to make a tax return.

Check if you need to send a Self Assessment tax return (GOV.UK)

If you have questions about benefits and self-employment:

• contact our helpline
• ask a question on our online community