Self-employed benefit claims

If you are self-employed and wish to claim Housing Benefit and Council Tax Benefit, we need to decide whether you are eligible for benefit. We do this by looking at your total net weekly income from your self-employed earnings and any other income or capital you may have.

How is self-employed income assessed?

First we have to work out the net profit from the total income.

The net profit is calculated as follows:

Gross income less any allowable business expenses = pre-tax profit.

From this figure we deduct the amount you would expect to pay in tax and national insurance, and half of any pension contributions. This gives us a net profit figure. This may not be the same as the figure from HM Revenues and Customs.

What are allowable business expenses?

These are expenses that we consider reasonable and are incurred wholly for running the business.

Examples of allowable expenses include:

• rent and water rates on business premises;
• gas, electricity and other fuel costs on business premises.
• telephone charges;
• advertising;
• postage and stationary;
• legal and accountancy fees;
• buying stock and supplies;
• business-only motor expenses;

Expenses such as these will be deducted from the gross income figures.

There are certain expenses that HM Revenues and Customs allow that we cannot allow, such as:

• depreciation;
• capital expenditure;
• business entertainment.

Couples who are business partners

We follow the same guidelines if the business partners are a couple. This ensures that we calculate the deductions for tax and national insurance correctly.

If I am trading as a child-minder, am I treated the same?

No. When calculating the net profit for self-employed child minders we do not deduct business expenses. We arrive at the net profit by deducting tax, national insurance contributions and half of any pension contributions from one third of the gross income.

What information will I have to provide?

• an audited set of your latest accounts;
• If these are not available, a completed self-employed earnings form that we can provide.
• In this case we will also need evidence of income and expenditure, for example receipts.

If you have only just started your business, you will need to estimate your initial income and expenditure figures.

If we use an estimated figure to assess your claim we will write to you again soon for actual income and expenditure figures.

Page last reviewed 13 Feb 2008