If you are self-employed and want 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 and capital you may have.
How is self-employed income assessed?
First we have to work out the net profit from your total income. The net profit is calculated by:
Gross income less any allowable 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 Inland Revenue figure.
What are allowable business expenses?
These are expenses that we consider reasonable and are incurred wholly for running the business.
Examples of allowable business expenses include:
- rent and water rates on business premises
- gas, electricity and any other fuel costs on business premises
- telephone charges
- advertising
- postage and stationary
- legal and accountancy fees
- buying stock and supplies
- business use only motor expenses
Expenses such as these will be deducted from the gross income figures.
There are certain expenses that the Inland Revenue may allow but we cannot, 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.
Is my Income calculated in the same way if I am a self-employed Child-Minder?
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 and any pension contributions from one third of the gross income you receive.
What Information will I have to provide?
A certified set of current accounts.
If these are not available, you need to complete a self-employed income from that we provide. If you have only just started your business, you will need to estimate at least three months income and expenditure figures.
If we use an estimated figure to assess your claim, we will write to you after three months for actual income and expenditure figures.
For more information on Housing / Council Tax Benefit and the self-employed, you can click on the link below to download a leaflet.
Date of last review: 26 August 2008