Benefit advice if you are self-employed

Am I employed or self-employed?

You will not normally be considered self-employed if you are a director of a limited company. 

If you can answer 'Yes' to all of the following questions, it will usually mean you are self-employed.

• can you hire someone to work for you or with you?
• do you engage helpers at your own expense? 
• do you risk your own money in the business?
• do you agree to do a job for a fixed price regardless of how long the job may take?
• can you choose what work to accept and how and when you do the work?
• do you have to put right unsatisfactory work in your own time and at your own expense?
• do you pay class 2 and/or class 4 National Insurance contributions?

If you have not answered Yes to all or most of the questions above, this may mean you are an employee and not self-employed.  The questions above only act as a guide so if you are still unsure you will need to contact us for further advice. 

If I am self-employed, can I claim Housing Benefit and Council Tax Reduction?

If you have to pay rent for your property and/or you are responsible for paying the Council Tax bill you can make a claim for Housing Benefit or Council Tax Reduction. You can apply online to claim Council Tax Reduction (and or Housing Benefit).

If you can't submit the application form straight away, you can still tell us you intend to claim by completing our online form.

If you need to hand in original documentation in support of a new or existing benefit claim or have a complex query that you would like to discuss face to face, our Contact Centre will be open from 28 April 2021 on an appointment only basis.  You may request an appointment by visiting www.swansea.gov.uk/contactcentrebooking.

If I have just started a new business how can I give proof of my self-employed earnings?

If you have just started the business we will ask you to fill in a self-employed form with an estimate of your income and expenses for the first 3 months of the business. During this 3 month period it is important that you keep a detailed record of income and expenditure as we will contact you after 3 months to ask you for the real figures. 

The gov.uk website gives advice to people who are self-employed on what records you need to keep (opens new window).

What evidence will the council need to see as proof of my self-employed earnings?

We will always need you to give evidence of your self-employed earnings. You can submit your self-employed form online (opens new window).

If you can give us prepared accounts (audited or otherwise) you will not need to fill in every part of the self-employed form as much of the information we need will be on your accounts. The self-employed form explains which sections you will need to fill in.

If you do not have prepared accounts (audited or otherwise) our form will ask you to give an accurate record of the income and expenditure of your business so that we can work out the net profit of the business. It is your responsibility to fill in the form and give us this information. We cannot do it for you as that would mean we would have to work out how much profit or loss your business has made.  

If you have more than one business you will need to give us separate self-employed forms and prepared accounts (if you have them) for each business. 

What business expenses do you take into account when working out my self-employed earnings?

Some business expenses are taken off your gross profit for benefit purposes while others are not, we only allow expenses that are necessary for business purposes.   

Examples of expenses that might be taken off:

• transport
• protective clothing
• postage
• legal and accountancy fees
• professional subscriptions
• rent
• advertising
• hire and leasing costs
• telephone
• insurance
• staff
• fuel
• stocks and supplies
• repairs
• proven bad debts
• cleaning
• vehicle costs
• bank charges
• stationary 

NB: the expenses that HMRC will allow for when working out your Income Tax are different to those that can be allowed for when we work out your Housing Benefit or Council Tax Reduction.

This means we cannot accept a tax office letter as proof of expenses. We can however accept a copy of the working papers that you would have sent in order to fill out your tax return (the information in the working papers is very similar to our self-employed form as it gives a breakdown of your expenses so we can check if they are allowable or not).

My self-employed earnings have changed (increased or decreased) significantly, will you re-calculate my income? 

Once we have worked out your self-employed earnings we can only re-calculate them if:

• there is an error in the calculation OR
• your claim is due for a periodic review OR
• a change in the circumstances of the business has taken place.

A change in the circumstances of the business is normally something that can be tied to a specific date such as:

• you gain/lose business - could be loss/gain of a specific contract(s)
• you change from part time to full time self-employment or vice versa
• your business location moves
• you are injured and can't work.

You need to tell us about a change in the circumstances of the business within one calendar month of the date it happens. In order to recalculate your claim based on the change we will need a statement or a letter from you with details of what has changed and when it changed, for example:

"I have been self-employed since September 2020, I gained 2 new contracts in June 2021 so I am providing my self-employed earnings from June 2021"  

A new self-employed form and prepared accounts if you have them, will need to be given to us to support the statement or letter.

What are prepared accounts (audited or otherwise)?

• a set of accounts prepared by an accountant
• accounts prepared by the business owner showing all details of their income and expenditure
• a diary of what the business owner has been paid and the expenses for each week or month, with a summary of totals for the whole period.

We cannot accept a tax office letter as proof of your earnings as the allowable expenses that HMRC can accept to work out Income Tax are different to those that we can accept.

We can however accept a printout of the working papers that you, the business owner, would complete in order to fill out the tax return. This is because the information in the working papers is very similar to our Self-Employed form giving a full breakdown of expenses.

How will you look at my earnings to make sure you are taking the right amount into account?

When we look at your earnings again will depend on the nature of your business and how long you have been trading but generally, the following will happen.

• we will make an initial assessment of your self-employed earnings when you start up your business
• 3 months later we will look at the income and expenditure figures to make sure it is accurate
• a date for the next review will be selected. Often, this can be a year or so after trading started, around the time the businesses' financial year will end. However, where appropriate, a different date will be chosen.

The table below summarises the evidence you will need to give at each stage.