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Self employment earnings

If you are self-employed and claim UC, you will be responsible for reporting your own earnings. You will be required to report at the end of each assessment period details of your SE income and expenses, including when your earnings are nil. This does mean that you will need to keep a separate set of accounts specifically for UC purposes.

At the end of your assessment period, a prompt will appear in your To Do list asking you for details. Your UC payment cannot be calculated until this information is provided so it is best to have the information ready.

UC self employed earnings are operated on a cash in/cash out basis. You will be asked for your self employed income received and any permitted expenses paid during the assessment period. Your earnings are then calculated each month (not annually or averages).

Common types of SE income include:

  • payment for goods and services with any tips and gratuities

  • payment in kind (when substituting payment for goods or service)

  • any refund of tax or National Insurance

  • Self-Employment Income Support Scheme (SEISS)

  • the sale or transfer of business assets (only if previously reported as an expense to UC)

This list is not exhaustive.

You would only report income for the assessment period if the money has been received.
You would not report payments owed to you, that remain unpaid.

Common types of permitted expenses include:

  • Income tax, National Insurance and relievable pension contributions

  • stock or materials

  • cost of business premises for example - heating, lighting, rent, water charges, cleaning of

  • premises, business rates

  • travel costs when they relate directly to running the business

  • Money paid to employees or subcontractors

  • use of vehicle – flat rate mileage (unless van, motorcycle or other motor vehicle designedmainly for business, such as a black-cab or driving school car fitted with dual controls – who

  • can use flat rate mileage or actual costs)

  • Use of home for business purposes – flat rate amount

This list is not exhaustive.

You would report permitted expenses for the period when the money is paid out.

All permitted expenses must have been incurred wholly, exclusively and reasonably for the purposes of the business.

This means that they must be:

  • appropriate to the business

  • necessary to the business

  • not excessive

You will not be asked to evidence your income and expenses when reporting your earnings, but you may be asked for the evidence at a later date.

Your self employed income minus permitted expenses will be your take home pay amount but you may be affected by the Minimum Income Floor if your earnings are not high enough and DWP have an expectation over what you earn.

If your expenses were more than your income, this is considered a loss (negative number). A loss will be carried forward and offset against any future self-employment take home pay.

For further info see UC guidance self employed earnings, UC guidance permitted expenses and Advice for Decision Makers Chapter H4.

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