Self-employed people are workers who are not employed under a contract.
Self employed workers, for example, might be window cleaners, certain taxi drivers, painters and decorators.
A person can be self-employed as a sole trader or as part of a business partnership.
Information Requirements for Self-Employed Customers
If you have recently started trading on a self-employed basis, we will ask for an estimate of the likely income and expenses for the business over the first few months trading. This will help us to work out your entitlement.
If you have been trading for over 12 months, we will ask for a full year's trading figures – normally in the way of a "profit and loss account". We will ask you for your unique tax reference number.
We may also ask for the most recent tax assessment form received from the HM Revenue and Customs (HMRC).
We may also ask you to complete a Self-employed earnings form.
What is my Total Income for Housing Benefit/Council Tax Reduction Purposes?
The starting point in the calculation is to work out the total business income for the period in question. This will include all money coming in, business start-up allowances, etc. but will not include sums of capital paid into the business.
Which Expenses are then taken off this Income?
The rules the Council use are like the rules operated for Tax purposes. Notable differences are that we cannot deduct any sums for expenses such as depreciation, business entertaining, capital repayments on loans or any sum which relates purely or partially to a private expense.
Childminders are treated differently. Instead of working out what their actual expenses are, two thirds of their total income will be disregarded. The remaining third becomes their "business income" in our calculations.
If you are a partner in a partnership, the pre-tax profit for the business (i.e. gross income less expenses) is divided equally between the number of partners. If there is a formal agreement in the partnership which governs that profit should be treated differently, this will take priority.
Tax & National Insurance
We will calculate Tax and National Insurance deductions ourselves based on the pre-tax profit figure. These figures may differ from the figures worked out by HMRC. Half of any private pension contributions are also disregarded.
All the above are then deducted from your pre-tax profit figure to give us the net income amount to be used when calculating Housing Benefit and Council Tax Reduction.