How Universal Credit works for self-employed

If you’re a self-employed person struggling to cover your living costs, the Universal Credit program may be able to help. It offers monthly payments for eligible persons to help cover essential expenses. 

Want to know more about how the program can support self-employed workers? You’ve come to the right place. 

This guide covers how universal credit works for self-employed people, including:

• What it offers
• How to qualify 
• How to claim it
• What you need to do 
• How to get paid 

Universal Credit is a government program that offers UK residents monthly payments to support living costs. If you earn a low income, are unemployed, or cannot work, you may be eligible for it. 

Universal Credit is a catchall benefit designed to replace other government programs, including: 

• Income Support
• Child Tax Credit
• Housing Benefit
• Working Tax Credit
• Income-based Jobseeker’s Allowance 
• Income-related Employment and Support Allowance 

It can be a challenge to work as self-employed. Your income is dependent on how many jobs you can secure, which may vary from month to month. 

Plus, if you’re new to self-employment, building up a reliable client base and income might take some time.  

Universal Credit helps low-income self-employed workers cover personal expenses. It’s a great way to reduce the financial stress of going self-employed, so you can focus on building your business. 

The prospect of Universal Credit might sound appealing. So how does it work when you’re self-employed? We’ll cover the essential information. 

Universal Credit offers monthly payments to help you cover essential living costs when you don’t earn enough. It provides a standard living cost allowance, with opportunities to receive more if you: 

• Care for children 
• Are unable to work due to a disability 
• Struggle to pay your rent 

Ultimately, the amount you receive depends on how much you earn as a self-employed person. You can use this benefits calculator to get a clearer picture. 

Since self-employed people often receive variable income, it may seem confusing to calculate what you’ll receive. 

Instead of varying the payments each month, Universal Credit uses a minimum income floor to standardise the process for primarily self-employed people. In other words, you earn most of your income from self-employment.

With a minimum income floor, you receive monthly payments based on the minimum wage of your age group. You can calculate this by:

• Multiplying your minimum wage by your typical weekly hours 
• Multiply that by 52 weeks in a year
• Divide that number by 12 to determine monthly payments 

If you earn less than your minimum income floor within a month, your Universal Credit payment remains the same. But if you make more, you’ll receive an amount based on those earnings, which means you’ll get less. 

Not everyone can receive Universal Credit. You must earn a low income, be unemployed, or unable to work. Beyond that, you need to: 

• Live within the UK
• Be over 18 (expect special circumstances)
• Be under pension age 
• Possess £16,000 or less (in cash, savings, or investments)

If you’re not a UK citizen, you may also need a settled or pre-settled status to qualify. 

How do you know if you qualify as low income as a self-employed person? 

Low income depends on a person’s situation and financial needs. To determine if you fall within ‘low income’, first assess whether you struggle to meet your living costs or pay financial obligations. 

If you typically earn less than your minimum income floor, you might qualify. Earning substantially less than you did when you were employed could be another sign. 

When you live with a partner, you need to apply for Universal Credit together even if your partner is not eligible. What you receive in credit depends on your partner’s earnings and savings alongside your own. 

Learn more about unique situations and qualifications with the UK government’s eligibility requirements.  

So, how can you claim Universal Credit as a self-employed person? 

You’ll apply online by creating a Universal Credit account. Once you do this, be sure to submit your claim within 28 days or you’ll need to begin again. 

Here’s some information you’ll need to submit your claim: 

• Details for the account you wish to receive your payments with
• Your email address
• Access to a phone 
• A form of ID to prove your identity (like a driver’s licence, passport, debit/credit card)
• What you spend on housing 
• Records of your earnings 
• Records of savings and investments
• Proof of disability that affects your work (if applicable)
• Childcare costs (if applicable) 

You can also seek help with your claim through the Universal Credit Hotline: 0800 328 5644. 

See also: How to maintain accurate business records as self-employed. 

When you receive Universal Credit as a self-employed person, you’ll need to report your monthly earnings through your account. Submit these earnings seven days before the end of the assessment period and fourteen days after the new period starts. 

You will also need to inform the Department of Work and Pensions of any changes in your financial situation. This might include an update regarding personal finances or expenses, such as the cost of your rent.

You can receive your monthly payments directly through a bank account, credit union, or building society. Provide this information when you apply. Then, you’ll automatically receive your payments on the 7th of the month. 

Hopefully, this article clearly explains how Universal Credit works for self-employed people. If you’re eligible for these benefits, it can reduce your stress and help you cover your personal expenses when you work for yourself. 

If you’d like to learn more about managing your finances as a self-employed person, check out how to budget when you’re self-employed. 

It’s easier to report your income and expenses for Universal Credit when you have organised finances.

Countingup is the business current account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK. 

Save yourself hours of accounting admin so you can focus on growing your business. 

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