If you are self-employed, you may have 12 months, called the ‘start-up period’, in which the minimum income floor does not apply and your UC is worked out on your actual earnings, however low they are.
The start-up period runs from the beginning of the assessment period in which the DWP decides you are in gainful self-employment, irrespective of when your self-employment began. (Before 23rd September 2020, it only applied to new businesses.) However, if you have ever had the minimum income floor applied to that self-employment before, it applies again without a start-up period. You are expected to take active steps to increase your earnings to the level of your individual earnings threshold – i.e., the level that means you no longer have to meet work-related requirements. The DWP can end the start-up period if it decides you are not doing this or are no longer in gainful self-employment.
The start-up period continues to run even if your UC stops and starts during the year. Although you can only have one start-up period for the same self-employment, if you begin different self-employment, you can have a new start-up period provided more than five years have passed since the start of the earlier period. See here if the start-up period was interrupted by the minimum income floor being suspended in March 2020.
When you claim UC or when you tell the DWP that you are self-employed, you are asked to attend a ‘gateway’ interview if you are someone who must meet all the work-related requirements. You are asked to bring evidence that you are in ‘gainful self-employment’. This means that:
- the self-employment is your main employment – i.e., it is your only employment or, if you also work for an employer, you normally spend more hours on, or have more earnings from, your self-employment; and
- your earnings count as self-employed earnings – i.e., they are not employed earnings and are from carrying out a ‘trade, profession or vocation’. If it is not clear whether you are employed or self-employed, the DWP may look at a number of factors including whether you pay your own tax, whether your work is supervised and whether you can decide your own hours; and
- your self-employment is ‘organised, developed, regular and carried on in expectation of profit’ – e.g., whether you work for financial gain, how many hours you do, whether you have a business plan or have taken steps to get work, what work is arranged, whether you are registered as self-employed with HMRC and whether you advertise your business.
The DWP may decide that you are in gainful self-employment even though you are off sick and not able to do any work, or you currently have no income at all from your business. If you disagree with a decision to apply a minimum income floor, you can ask for a revision and then appeal. You may be able to argue, for example, that your self-employment is no longer organised or regular and you no longer have an expectation of profit. Bear in mind that business assets can only be disregarded for a limited time. If you are off sick and your weekly earnings are below 16 times the hourly rate of the minimum wage, send the DWP medical certificates so that it can assess whether you have limited capability for work.
Once the DWP decides you are in gainful self-employment, you normally have a start-up period before the minimum income floor applies (see here)
If you are not in gainful self-employment, you must still report your earnings and these are taken into account in your UC award, but no minimum income floor is applied.