Head of LITRG Low Incomes Tax Reform Group/CIOT
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Universal Credit and the self employed - LITRG guide
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Universal Credit: Get the details right

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Victoria Todd gives a brief outline of how Universal Credit works particularly for self-employed people who need to make a claim.

7th Apr 2020
Head of LITRG Low Incomes Tax Reform Group/CIOT
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The current coronavirus situation means that some self-employed individuals have seen a significant fall in income with many unable to work at all at the present time.

On 20 March, in his first major speech on support for businesses, the Chancellor said that every self-employed person can now access, in full, Universal Credit (UC) at a rate equivalent to Statutory Sick Pay (SSP) for employees.

Not surprisingly, this is a simplification of the rules. To help practitioners get to grips with the UC system, AccountingWEB asked me to put together an introductory overview.

What is UC?

UC is a means-tested benefit that was introduced in 2013 to replace six ‘legacy’ benefits:

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Replies (7)

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bike
By FirstTab
07th Apr 2020 22:11

Very helpful. Thank you.

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bike
By FirstTab
07th Apr 2020 22:11

Very helpful. Thank you.

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By clark.hall
08th Apr 2020 10:42

One to bookmark. Helpful article, thanks

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By Coopers Willy
09th Apr 2020 21:16

Thank you Victoria, handy article. I note certain directors are treated for UC purposes as self-employed and so this presumably means that such UC claimants need to be reporting their company profits (on a cash basis) each month, rather than reporting salaries/dividends actually drawn. Does this really mean a company director could be drawing a salary, but so long as overall the company is making a loss before deducting the cost of this salary then the income for UC purposes is nil?

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Replying to Coopers Willy:
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By clark.hall
14th May 2020 08:38

Just looking into this myself. The link to revenuebenefits.org is useful but I'd say it's currently much more of a grey area than reporting profits on a cash-basis. In my opinion, if say husband and wife directors are drawing most profits as salary/dividends and leaving reasonable working capital in the company - I don't think those amounts of retained profits would be reportable under UC.
But, I'm just thinking out loud.

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Morph
By kevinringer
16th Apr 2020 13:55

Thanks Victoria. I've been dealing with Tax Credits for years but have very few clients on UC so haven't got involved with them. Your article is really helpful. Can you clarify whether business assets are part of the £6000 and if so is that only cash (because income is cash based) or also debtors and creditors?

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Replying to kevinringer:
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By clark.hall
14th May 2020 08:30

Last time I looked into this it was the share capital at cost that was treated as Capital and which if total capital > £6,000 will give rise to "Tariff Income".

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