RECEIPTS FROM SELF-EMPLOYMENT
The starting point to work out how much self-employed earnings are taken into account is the actual amount of receipts into the business in the assessment period – e.g., sales, takings and payment for work. Include:
- any refund of income tax, VAT or NI contributions for the self-employment.
- receipts in kind – i.e., the value of the goods or service you provided for which you accepted payment in kind.
- sale of business assets (if previously deducted from earnings for UC as an expense). If you stop using an asset for the business but do not sell it, the market value counts as a receipt.
- any payment under the Self-Employment Income Support Scheme (a coronavirus support grant). Other government grants and loans to businesses impacted by coronavirus may be treated as capital and disregarded for 12 months.
Expenses must be reasonable and ‘wholly and exclusively’ incurred for the purposes of your business. Reasonable expenses may include:
- regular costs – e.g., rent, utilities, insurance and wages.
- stock purchase.
- stationery and advertising.
- repairs of business assets.
- transport (but see below for flat-rate deductions).
- equipment purchases and hire.
- up to £41 repayment of interest on a loan – e.g., for an overdraft or credit card.
These are just examples. The deduction allowed is usually the actual amount of permitted expenses paid in the assessment period. However, there are flat-rate deductions for the use of a vehicle that you can choose to include instead of the actual expense of buying and using the vehicle:
- for a motorcycle, 24 pence a mile.
- for a car, van or other vehicle, 45 pence a mile for the first 833 miles, then 25 pence a mile after that (for a car, you must use this rate rather than the actual expense).
If an expense has been incurred partly for business and partly for private purposes, it can be apportioned and the part that is identifiably for business deducted. There are set deductions for the following.
If you use your own home for ‘income-generating activities’ for the business, instead of deducting actual expenses, there is a flat-rate deduction that depends on the number of hours completed in the assessment period. Income-generating activities include providing services to customers, business administration, sales and marketing, but do not include being on call. The deduction is:
- £10 for work of at least 25 hours, but no more than 50 hours in the month; or
- £18 for work of more than 50 hours, but no more than 100 hours in the month; or
- £26 for more than 100 hours’ work in the month.
If you live in premises that you use mainly for your business, deduct an amount from the expenses relating to the premises, depending on the number of people living there:
- £350 if you live alone; or
- £500 if you live with one other person: or
- £650 if you live with two or more other people.