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Will my Self-employment Income Support grant be affected if I claim Universal Credit?

Paloma Kubiak
Written By:
Paloma Kubiak

The government has announced a number of measures to help workers financially impacted by coronavirus. If you’re self-employed, there is a support scheme, but it is only available from June.

While a welcome step from the government, the Self-employment Income Support Scheme (SEISS) allows the self-employed and those in partnerships to receive a taxable grant worth 80% of average monthly profits based on the last three years of tax returns, up to a maximum of £2,500 a month.

It will be open to those across the UK for at least three months, starting in June. HMRC will contact these workers direct and pay the grant into bank accounts.

Between now and then however, many who set up their own businesses may be struggling financially due to global health pandemic. One option would be to claim Universal Credit (UC) now (standard £409.89 a month for single people aged 25+), but will it affect future SEISS payments?

The government guidance states: “You can make a claim for Universal Credit while you wait for the grant, but any grant received will be treated as part of your self-employment income and may affect the amount of UC you get. Any UC claims for earlier periods will not be affected.”

It added that if you receive the grant you can continue to work or take on other employment including voluntary work.

While two distinct support schemes, there will be some interaction or overlap between them.

For the self-employed awaiting the SEISS grant, any UC claim now won’t affect future SEISS payments. The SEISS grant is based on average figures over the last three tax years (as above) and takes no account of whether someone is claiming benefits now.

However, as the government confirmed the self-employed can still continue to work and will be eligible for the SEISS grant, money you make from your business could affect the level of UC payments. See the government Universal Credit calculator to see how much you could receive.

On the flip side, the SEISS grant may affect UC payments going forward as it’s treated as income.

Kay Ingram, director of public policy at independent financial advisory firm, LEBC group, said: “There are mechanisms already available to the Department for Work and Pensions to adjust future claims for UC and to require repayment of any overpayment made, where an individual’s income exceeds certain amounts.

“This may result in a repayment of UC being due, but not in all cases and individual circumstances will dictate the outcome.”

Are you eligible to claim Universal Credit?

If you’re over 18 and under state pension age, you may be eligible for UC.

However, you can’t have personal savings above £16,000.

And for those who apply to receive UC, you have to wait five weeks for a first payment. Alternatively, you can take out an advance payment loan.

Many may be put off applying for UC as they have savings above the £16,000 threshold, particularly where you were putting money aside for a future tax bill.

Martin Lewis, founder of confirmed with the DWP that if you have savings to pay your tax bill, make a note of this in the online UC application form and the sum should be discounted from the calculations.

The DWP stated: “We’d expect people to have business assets in a business bank account, including savings for tax liability, which would not be counted towards their capital limit.

“However, if someone has money in their personal account to be used for business purposes, it won’t be counted towards their capital, but they may be asked to prove that the money is for business purposes.”

Further, DWP have also clarified that business assets such as machinery, stock and vehicles will not count as assets in assessing savings.

Are you eligible for the Self-employment Income Support Scheme?

Chancellor Rishi Sunak explained there are a number of criteria to meet in order to be eligible for the SEISS:

  • Those who have a tax return for 2018/19 will be able to apply. For those who have recently gone self-employed, they won’t be eligible for this support.
  • For those who may only have one or two years of accounts, the government will use those profits to form the basis of the grant.
  • It’s only available to those with trading profits up to £50,000 a year.
  • At least 50% of the individual’s income must be from self-employment.
  • You’ve lost trading profits due to coronavirus

If you missed the January 2020 deadline to submit your 2018/19 tax return, you have until Thursday 23 April to do so in order to be eligible for the financial help.

More on the interaction between Universal Credit and the Self-employed grant scheme

Ingram explains that claimants may continue to work but will receive a deduction from the amount of UC they receive depending on their profits. Up to £512 per month may be earned (£292 pm if in receipt of housing benefit) with no deduction from UC. Any profits over that amount are subject to a reduction to UC of 63p in the £1.

Where an individual’s profits exceed £2,500 per month, the surplus is carried forward to the following month and offset against future entitlements. Where losses occur (which could be the case for those with closed down businesses or reduced working), but they are still funding business costs such as rent and vehicle hire or licensing costs, losses may also be carried forward for UC purposes.

DWP will count the SEISS as the individual’s income so may result in a claim for partial repayment of UC later, where the payment under the SEISS is greater than £512 per month. Those self-employed bearing ongoing business costs which result in a loss, can offset these against the SEISS income before calculating their profits for any UC reclaim.

What is still not clear at this stage is whether the payment of SEISS in June will be treated for UC purposes as a one-off payment or as 3x the monthly payments.

Ingram added: “Those without savings to fall back on may need to claim Universal Credit now to make ends meet until they receive the payment in June. Even if the lockdown ends soon many self-employed may take months to recoup their lost profits and so claiming an element of Universal Credit, while rebuilding their business, may continue for some time.”