Guidance for self-employment and applying for benefits
If you pay your own income tax and national Insurance contributions you are classed as being self-employed. If you are a director of a company, then your earnings from the company will be counted as income and your share of any dividend.
In order to assess your entitlement we will need to see evidence of your income. If you have just commenced your self-employment we will ask to see a projection of what you think your earnings will be in your first three months of trading.
If you have been self-employed for some time and have your most recent audited accounts we will assess your claim based on these. If you do not have audited accounts we will ask you to provide your income and expenditure details from your own records for your most recent year's trading figures.
We can provide you with a pro-forma to assist your calculations and we may ask you to provide some receipts to support your entries on the pro forma. We will accept your own records if they are presented in a clear way which will enable your annual income to be calculated
How will we calculate your self employment?
We work out your total income for the period and deduct any allowable expenses, notional income Tax and National Insurance liabilities. If you have just started trading, we will get you to predict your first 13 weeks. After 13 weeks, we will then ask you to provide actual figures for your first 13 weeks of trading. We will review this again at 26 weeks and then after 1 year of trading.
Some expenses we will deduct from your gross income. These include:
- Purchase of stocks and supplies
- Manufacturing materials and goods for resale
- Carriage, packing and delivery costs
- Employees wages and employers NI contributions
- Hire, hire purchase and leasing charges
- Subscriptions to professional and trade organisations
- Legal fees and accountancy charges
- Bank charges for a business bank account
- Business travel and hotel expenses
- Capital repayments on loans used to replace equipment or machinery
- Capital or income spent on the repair of existing business assets (after deducting any insurance pay-out)
- Interest payments on any business loan
- Proven bad debts and expenses incurred in the recovery of these
- Cleaning and protective clothing
- Advertising, telephone, postage
Expenses that are not deductible
Some expenses we are not able to deduct from your gross income. They include:
- Depreciation of any capital asset
- Any sum used in the setting up or expansion of the business
- Business entertainment expenses
- Any sum for domestic or private use
- Capital repayments on business loans
We do not need to see all your income and expenditure, just your total income. We will disregard two-thirds of this and work out your estimated tax and National Insurance on the third that is left.
The gross receipts and expenses of the fishing boat are required along with the agreed catching proceeds. The normal weekly earnings are then calculated by totalling the boat's gross receipt, deducting allowable expenses, then sharing the remaining sum among the crew, according to the distribution agreement.
Minimum income floor for Council Tax Reduction
From April 2016 we will use the minimum income floor to calculate self-employed income. This means calculating the claim using the greater of either your income from their profit and loss accounts or 35 hours at minimum or national living wage as appropriate, subject to a notional reduction for National taxation and National Insurance contributions, with the following exceptions:-
- For self-employed claimants with caring responsibilities for a vulnerable person (excluding care for dependent children) there is discretion to reduce the assumed hours worked from 35 on an individual basis and dependent on the level of care and support provided.
- For a lone parent the claim will be calculated using the greater of either their income from their profit and loss accounts or 16 hours at minimum or national living wage as appropriate
- For self-employed claimants also undertaking PAYE employment the Council has the discretion to use a number of hours of self-employment which, when combined with the PAYE employment, does not exceed 35 hours