Assessment of self-employed earnings

The rules on assessment of self-employed earnings under universal credit are set out in the Universal Credit Regulations 2013 (SI.No.376/2013).

NB: See below for equivalent legislation in Northern Ireland.

Calculation of self-employed earnings

​Regulation 57 of SI.No.376/2013

Sets out the method for calculating a person’s self-employed earnings.

Unused losses

​Regulation 57A of SI.No.376/2013

Provides for previous losses (as calculated by regulation 57) that have not been extinguished in subsequent assessment periods to be taken into account in calculating a person’s self-employed earnings.

Permitted expenses

​Regulation 58 and 59 of SI.No.376/2013

Provide for deductions for expenses that can be made from self-employed earnings.

Minimum income floor (MIF)

Regulation 62 of SI.No.376/2013

Provides for claimants who are in ‘gainful self-employment’ and would (apart from the MIF) be subject to all work-related requirements to be treated as if they were in receipt of earnings at the level of their individual threshold (as set out in regulation 90).

NB - SI.No.289/2020 enables the MIF to be suspended for self-employed claimants treated as having limited capability for work (LCW) due to being affected by COVID-19, and for the suspension period to be extended after a claimant ceases to be treated as having LCW. In addition, SI.No.371/2020 includes provision that enables the Secretary of State to vary or cease the application of the MIF for all self-employed claimants and to delay certain MIF-related decisions.

Start-up period

Regulation 63 of SI.No.376/2013

Provides for a period in which the MIF does not apply.

Meaning of ‘gainful self-employment’

Regulation 64 of SI.No.376/2013

Defines when a claimant is in ‘gainful self-employment’.

In Northern Ireland, SR.No.216/2016 makes provisions that are largely equivalent to that in Great Britain.

In addition, SR.No.53/2020 and SR.No.33/2020 make provision in Northern Ireland equivalent to that in Great Britain in relation to the suspension of the minimum income floor for self-employed claimants.

Further explanation of the legislation is set out in guidance. Please note, however, guidance is not binding and cannot override the legislation.

NB - ADM Memo 02/20 ​advises that a claimant who has, or is treated as having, limited capability for work as a result of COVID-19 is not subject to all work-related requirements and so the MIF does not apply, and ADM Memo 04/20 advises that, from 30 March 2020, the decision maker has discretion to apply a number of measures in relation to the MIF for self-employed claimants as a consequence of COVID-19.

Advice for decision making

Chapter H4

Guidance to decision makers on self-employed earnings.

DWP guidance from parliament.uk

Self-employed earnings

Set out guidance on what a claimant needs to report, how a claimant reports self-employed losses and treatment of self-employed losses.

DWP guidance from parliament.uk

Self-employed earnings - perrmitted expenses

Sets out guidance on permitted expenses, payment in kind, tips and gratuities, payment of interest on business loans and VAT.

DWP guidance from parliament.uk

Self-employed Start-up Period

Sets out guidance on the start-up period, quarterly reviews and work requirements, changes of circumstances, claimant is no longer eligible or gainfully self-employed, claimant not taking active steps, and ending the start-up period.

DWP guidance from parliament.uk

Self-reported earnings

Sets out guidance on self-reported earnings, earnings reported late or not received, and earnings from a suspended award.

DWP guidance from parliament.uk

Surplus, fluctuating and irregular earnings plus payment cycles

Sets out guidance on surplus earnings (including where claimant separates from partner), fluctuating earnings, irregular earnings, late, missing and incorrect payments, earnings that are not paid monthly or paid on a different date than normal, and decreased earnings.

DWP guidance from parliament.uk

Applying the minimum income floor

​Sets out guidance to DWP staff including on the level of the MIF, conditionality thresholds, couples and the ‘Move to Universal Credit’ process for self-employed claimants.

DWP guidance from parliament.uk

Work allowance and earnings taper rate

Sets out guidance on calculating earning, work allowances and the taper rate.

Case law​ provides further interpretation of the legislation and establishes legal precedent.

High Court

[2019] EWHC 2356 (Admin)

High Court rules that universal credit minimum income floor is not unlawful.

Upper Tribunal

[2020] UKUT 18 (AAC)

Whether decision to apply minimum income floor was appealable / application of minimum income floor to seasonal worker