How Universal Credit payments work if you're self-employed

Your Universal Credit payments might change - it depends on how much you earn.

Each month, the Department for Work and Pensions (DWP) check if you’ve earned more or less than they expect you to earn. The amount the DWP expect you to earn each month is called your ‘minimum income floor.' 

The minimum income floor is different from what you actually earn.

If you earn less than your minimum income floor, the DWP will usually work out your Universal Credit payment as if you’d earned your minimum income floor. 

If you earn more than your minimum income floor, your Universal Credit payment will be based on your actual earnings. 

For example, if your minimum income floor is £1,200 and you earn £800 - the DWP might work out your Universal Credit payment as if you had earned £1,200. This means the DWP will take more off your Universal Credit payment than if they’d used your actual earnings.   

The DWP might not use the minimum income floor to work out your payments - for example, if you're sick or haven't claimed Universal Credit before. Check if the minimum income floor applies to you before you work out your payments.

If you haven’t claimed Universal Credit yet, check if you can get Universal Credit.

Check if the minimum income floor will apply to you

The minimum income floor might apply to you if you're in gainful self-employment. This means being self-employed is your main job, you work regularly and expect to make a profit. 

You’ll also need to be in the ‘all work-related requirements group’ - this means you’re expected to work or look for work.

If you’re not in gainful self-employment and the all work-related requirements group, the DWP won’t use the minimum income floor - they’ll use how much you actually earned to work out your payments. 

You can find out which work-related activity group you’re in by looking in your Universal Credit online account.

If you don’t have an online account, you can find your work-related activity group on your paper ‘claimant commitment’. If you can’t find your claimant commitment, ask your work coach which work-related activity group you’re in.

You might be in the all work-related requirements group when you shouldn’t be - for example, if you’re a carer or responsible for children. Check you’re in the right work-related activity group. 

If you're in gainful self-employment

When the DWP say you're in gainful self employment, they might not use the minimum income floor straight away - they might use your actual earnings instead. This is known as a start-up period and lasts for a year. After a year, the minimum income floor might be used to work out your payments.

If you don’t know whether the DWP have said you’re in gainful self-employment, check with your work coach. 

You won’t have a start-up period if either:

• you’ve already had the minimum income floor used to work out your earnings for the same self-employed work 

• you’ve already had a start-up period - for any business you’ve had in the last 5 years 

During your start-up period, you’ll need to show your work coach how you’re growing your business. If you don’t do this, the DWP can end your start-up period early and the minimum income floor will be used to work out your payments.

You can find out more about growing a business on GOV.UK 

If you're too sick to work

The DWP might use your actual earnings instead of the minimum income floor.

If you're too sick to work and it affects your ability to make a profit, call the Universal Credit helpline. Tell them about your situation and the length of time you're expected to be sick - they might change your gainful self-employment status.

If you're off sick for 7 days or more, you'll have to get a fit note.

You can get a fit note from the following healthcare professionals:

• your GP or a doctor at a hospital

• a registered nurse

• a pharmacist

• an occupational therapist

• a physiotherapist

Your fit note will be either printed or digital. If you’re not sure which kind you’ll get and how you’ll get it, check with the healthcare professional.

If you get a printed fit note, check that the healthcare professional has signed it.

If you get a digital fit note, check that it includes the healthcare professional’s name.

If the healthcare professional hasn't either signed your fit note or included their name, it could be rejected by the DWP and you might have to get a new one.

You should always keep your fit note - you might have to pay for a replacement if you lose or delete it.

You can:

• give the DWP a copy - either printed or digital

• upload it to the ‘To do list’ section of your online account

You should also take your fit note with you when you meet your work coach for the first time. If you have a digital fit note you can show it to them on your phone or another device.

You might need to give DWP a copy of your fit note or upload it to your journal - ask your work coach if you’re not sure how to do this.

If the minimum income floor doesn't apply to you

Your payments will be based on what you actually earn through self-employment. Check how much Universal Credit you’ll get.

You'll have to report your earnings every month to the DWP. Find out what earnings to report and how to do it.

If the DWP apply the minimum income floor when they shouldn't, you might be able to challenge their decision.

Work out your minimum income floor 

Your minimum income floor is based on the national minimum wage and the number of hours you agreed to work when you met your work coach. The number of hours is in your written agreement called a 'claimant commitment'.

To work out your minimum income floor, you need to:

1. Multiply the minimum wage for your age group by the number of hours you’re expected to work

2. Multiply that number by 52 

3. Divide it by 12 to get a monthly figure

The number you’re left with is your minimum income floor. This is also known as your ‘individual earnings threshold’.  

These are the national minimum wage rates:

If your minimum income floor is over £1,048, the DWP might reduce it slightly for tax and National Insurance reasons. If you want to know how much your minimum income floor will be reduced, talk to an adviser. 

Check how the minimum income floor affects your payment

Each month, the DWP will use either your actual earnings or your minimum income floor to work out your payment. This depends on how much you earned and whether you live with a partner. 

If you live with a partner

The DWP will look at both your earnings when deciding whether to use the minimum income floor. 

You’ll need to:

1. work out your minimum income floor

2. work out what your partner’s minimum income floor would be - to do this, use the process you used to work out your minimum income floor

3. add your partner's amount to your minimum income floor

This is your ‘couples earnings threshold’. If you and your partner have earned more than your couples earnings threshold, the DWP will use how much you actually earned to work out your Universal Credit payment. Check how much Universal Credit you’ll get. 

If your combined earnings are less than your couples earnings threshold, the DWP will use your individual minimum income floor instead of your actual earnings. Your partner’s earnings could reduce your minimum income floor. This is a complicated calculation, talk to an adviser. 

If you don’t live with a partner

If you earned more than your minimum income floor, the DWP will use your actual earnings.

If you earned less than your minimum income floor, the DWP will work out your payment as if you'd earned the minimum income floor amount.

Once you know your minimum income floor and if it will be used to work out your payment, you can work out how much Universal Credit you’ll get.

If you need help working out how much you’ll get, talk to an adviser.

Example

Ollie is single and works as a self-employed painter. His minimum income floor is £1,167.33 per month. 

During January, Ollie earns £400. This means his earnings are lower than his minimum income floor. The DWP will work out his payment as if he’d earned his minimum income floor - £1,167.33. 

This means the DWP will take more off his Universal Credit payment than if they’d used his actual earnings.

Reporting your monthly earnings

You'll have to report your earnings every month to the DWP.

Find out what earnings to report and how to do it.

Manage your income and expenses from month to month

If your earnings change each month, your Universal Credit payment will also change. This can make it hard to budget. 

You can ask HMRC to let you pay income tax and National Insurance monthly instead of yearly - this is called a 'budget payment plan'.

Find out more ways to keep your self-employed income and expenses more consistent on the Money Helper website.