How does Universal Credit work if you're self-employed?

Gainfully self-employed: what it means

DWP will look at whether you are 'gainfully self-employed'. This decides which rules apply to you. You count as gainfully self-employed if your self-employment is your main job or main income, and it is:

• organised, for example you keep records
• developed, for example you have a business plan or you advertise
• regular, for example you have steady work now and in future
• expected to make a profit

The gateway interview

You will be asked to a meeting to talk about your business. Bring evidence such as:

• details of your business, like your Unique Taxpayer Reference
• records, such as invoices, receipts and bank statements
• proof of activity, such as a website or adverts
• letters from official bodies, like HMRC

The start-up period

If you are gainfully self-employed and your business is new, you may get a start-up period of up to 12 months.

• Universal Credit uses your real monthly earnings.
• You do not have to look for other work.
• You will have a work coach appointment about every 3 months.
• You usually only get one start-up period. You can get another only if it has been more than 5 years and you start a completely different type of business.

The minimum income floor

After any start-up period, a minimum income floor may apply. This is what an employed person in a similar situation would earn on the National Living Wage or National Minimum Wage, after tax and National Insurance.

So if your business has a quiet month, you may get less Universal Credit than your real earnings suggest.

Reporting every month

At the end of each monthly assessment period you must report:

• how much you earned from self-employment, even if it was nothing
• money coming into the business
• business expenses paid out

Losses and big months

• Losses: a loss can be carried forward and set against profits in later months.
• Surplus earnings: if you earn £2,500 or more over the level where Universal Credit stops, you get no Universal Credit that month. The extra is carried into the next month.
• Employed and self-employed: your earnings are added together. A business loss is not taken off your wages; it is carried forward to later months instead.

If you live in Northern Ireland

Universal Credit is run by the Department for Communities. The start-up period (up to 12 months) and minimum income floor work the same way. If you got a Migration Notice and are gainfully self-employed, you get a 12-month start-up period before the floor applies.

Related guides

• What is the Universal Credit minimum income floor?
• How does working affect my Universal Credit?
• How much Universal Credit will I get?
• How do I become a sole trader?
• When do I need to register for Self Assessment?

Where this comes from

• Self-employment and Universal Credit
• Claiming Universal Credit when you are self-employed (DWP quick guide)
• Claiming Universal Credit when you're self-employed (nidirect)