Whether you’re new to working for yourself or have been doing it for years, it’s important to keep up to date on the benefits and grants available to you to help with the cost of living. These include an Employment and Support Allowance (ESA) if you’re sick and Universal Credit for times you may have a low income. We’ve put together guides to help you out.
If you’re self-employed and have been financially hit by the coronavirus pandemic and high living costs, find out what support is out there for you.
You might be able to claim Universal Credit if you need to top up your income and have low household income and savings.
Be aware, though, if you have savings of more than £16,000 and your partner or spouse earns too much, you won’t be able to make a claim.
You’ll need to attend a gateway interview with a DWP work coach so they can check that self-employment is your main job. You should be making some profit or expect to if you’ve only just started out.
This means you’ll have to show evidence including:
If you don’t show enough evidence, the assessor might decide you’re not ‘gainfully’ self-employed. This means you’ll need to look, and be available, for other work while you’re getting Universal Credit.
Find out more about claiming Universal Credit in our guide Universal Credit if you’re self-employed.
Citizens Advice Help to Claim service is free and confidential.
They can help you:
England and Wales:
For more details, and to find your nearest branch visit Citizens AdviceOpens in a new window
Or in England, call 0800 144 8444Opens in a new window and Wales, call 0800 024 1220Opens in a new window
Scotland:
Visit Citizens Advice ScotlandOpens in a new window or call 0800 023 2581Opens in a new window
Northern Ireland:
Universal Credit works differently. Find out more at nidirectOpens in a new window
If you’re self-employed you can’t claim Statutory Sick Pay.
If you’ve paid enough National Insurance Contributions, you might be able to claim new style Employment and Support Allowance (ESA) if you’re ill.
If you qualify for this self-emplyed benefit, you can claim this benefit regardless of your household income or savings.
If you haven’t paid enough National Insurance Contributions you might be able to claim the limited capability for work and work-related activity element of Universal Credit if you have savings of less than £16,000.
If you live with a partner, their income will also be taken into account as part of the claim for Universal Credit.
Find out if you qualify for ESA and what to do if you don’tOpens in a new window on the GOV.UK website
If you live in Northern Ireland, find out about what benefits and financial support you might be entitled to on the nidirect websiteOpens in a new window
These schemes are no longer available if you live in England, Wales or Scotland.
In Northern Ireland, you can still apply. Find out more on the nidirect websiteOpens in a new window
If you decide you no longer want to be self-employed, you must tell HMRC you’ve stopped trading as a sole trader or you’re ending or leaving a business partnership.
You’ll also need to send a final tax return.
If you’ve been self-employed for a while, you can't usually claim new-style Jobseeker's Allowance (JSA) if you were only paying Class 2 National Insurance contributions.
However, if you’ve paid enough Class 1 employee National Insurance contributions in the past two to three tax years, you might be able to make a claim for new-style JSA.
If your household income and savings are low and you have savings of less than £16,000, you might be able to make a claim for Universal Credit instead of JSA. Your spouse or partner’s income will be taken into account as part of the claim.
If you live in England, Wales or Scotland, use Help to Claim, a free and confidential service from Citizens Advice to check Universal Credit is right for you before you make a claim.
Citizens Advice England and WalesOpens in a new window
Citizens Advice ScotlandOpens in a new window
In Northern Ireland, Universal Credit works differently. Find out more on the nidirect websiteOpens in a new window
Find out how to manage your monthly income
When you’re self-employed, you’re responsible for paying tax and National Insurance on your income. Find out how to stay on top of all your records to work out how much you need to pay.
Having an irregular income can make budgeting seem impossible when you have different amounts coming in each month, but if you know how much is going out each month, you can budget.
If your income varies, a good tip is to budget for your lowest monthly income – at least you’ll always have the major costs covered. Then, if you have a good month, you can revise your monthly budget up.
Or total up everything you had coming in over the last year and divide it by 12. This will give you an average monthly income to use as a base mark for your income.
Then think ahead and look at how your outgoings, costs and spending is spread across the year, for example, utility bills, work costs, car tax, any insurance you might have, self-assessment tax bill and add them in your budget.
Remember, there will be months when certain payments are due or you spend more, such as Christmas, school holidays or family birthdays.
Our guide How to budget for an irregular income is a good place to start, if you’re self-employed
Outstanding payments can have a severe impact on your cashflow if customers don’t pay on time. Here’s a checklist for things you can do to try and keep control of the money coming in:
If a business misses an agreed payment date you can claim interest and debt recovery costs. Find out how on the GOV.UKOpens in a new window website
If an individual or business owes you money for outstanding work, learn how you can take your claim to the county court on the GOV.UKOpens in a new window website
If you separate your personal finances from your business finances, it will make things far easier when it comes to doing your self-assessment tax return.
For example, keeping separate bank accounts and credit cards for your business will make it quicker to track and record your business expenses.
You'll also have a simple, accurate record of what’s coming in and what’s going out, making budgeting easier.
Look at your business expenses and see whether you can switch from annual to monthly payments where possible.
For some expenses, such as insurance premiums, you might need to shop around for a provider who doesn’t charge more for monthly payments.
You can use our free and easy-to-use Budget Planner to help you manage your household spending
Want to take another look at your finances when you’re on a tight budget? Check out our guide Living on a squeezed income.
The best way to save for your Self Assessment tax bill is to put a bit away every time you receive any income rather than waiting to receive a big tax bill.
For example, you might consider opening a savings account and transfer some money each time you get paid and make this account for tax payments only, and off limits for other spending.
This type of planning can help during times when you’re bringing in even less than usual, avoiding a massive strain on your cashflow, on your business, and on you.
Use the self-employed ready reckoner on GOV.UKOpens in a new window to budget for your Self Assessment tax bill
Find out more about getting your debts under control
Managing your bills can become more difficult in tough economic times. It’s important to understand how to prioritise paying your bills or if you’ve missed a payment, find out how to get debt advice.
The consequences of not paying off some bills before others can be more serious.
So, if you’re struggling to make your repayments on time, you need to look at all your debts and split them into:
Use our quick, easy-to-use Bill prioritiser: get help with your bills to help you prioritise and work out which debts to pay off first
If you need more support or don’t know where to start paying off business debts, you’re not alone.
If you live in England, Scotland or Wales and have business debts, get free help and advice from Business DebtlineOpens in a new window They can also help with your personal debts too.
If you live in Northern Ireland, find a debt adviser at nidirectOpens in a new window
It's important to think carefully before taking money from your pension pot to clear debts. This should only be considered as a last resort.
You usually can't take money from your pension if you’re aged under 55. So if someone contacts you out of the blue and says they can help you access your pension pot early, it’s likely to be a pension scam.
You could lose your money and face a tax charge of up to 55% of the amount taken out or transferred, plus further charges from your provider.
If you're over 55 and can access your pension pot without penalties, it's still always best to understand all the options available to pay off your debts before taking money out of your pension.
Whatever, your age, read our guide Using your pensions to pay off debts.
Contact our Pensions Helpline to get free, confidential and expert guidance before you take money out of your pension to pay off debts.
Call us free on 0800 011 3797 or use our webchatOpens in a new window. One of our pension specialists will be happy to answer your questions.
Opening times: Monday to Friday, 9am to 5pm (helpline), 9am to 6pm (webchat). Closed on bank holidays.
Find out more about how to protect yourself and your business
It’s important to have insurance in place to protect you from being out of pocket during a difficult time. This could leave you with one less thing to worry about.
There are lots of different types of business insurance on offer. The best type of insurance for you will vary based on various factors, including:
Shop around for quotes, or consider using a specialist business broker which also discusses the type of business cover you might need. You can find a specialist broker on the British Insurance Brokers’ Association websiteOpens in a new window
Take a look at what’s available and what you might need in our guide Business insurance when you’re self-employed
Not having sick pay to fall back on can be particularly difficult if you’re self-employed. Income protection is a long-term insurance policy that ensures you get a regular income until you retire or are able to return to work.
It's always best to use a specialist provider when choosing income protection as it’s a complex product and prices can vary considerably.
Five things to think about when buying income protection insurance:
Consider your options by reading our guide Personal insurance when you’re self-employed
To find out more about how to review your savings and pensions
It’s a good idea to regularly look at your long-term and short-term savings. Find out how to prioritise paying debts and putting money aside for your tax bill.
Regular saving is really important especially when money is tight. Now is a good time to look at all your outgoings including money that you’re putting into savings.
As a rule of thumb, prioritise putting money aside as you earn for your self assessment tax bill, in the first instance.
For tips on what to do, read our guide Should you save, or pay off loans and credit cards?
How much you should put into your pension depends on how soon you start and how much you can afford to put in your pot.
The earlier you begin, the less you’ll have to put away every month to afford a comfortable retirement.
But if you’re struggling with your everyday bills, it’s important to get those under control first. Consider putting your pension contributions on hold until your work picks up.
If your earnings increase, consider increasing your regular payments or paying a lump sum into your pension.
Want to know what to look for in a pension for self-employed workers? Read our guide Pensions for self-employed people
An appointment with Pension Wise, a government service from MoneyHelper, can help you make sense of what your financial situation will be when you retire and go through your options.
If you are aged 50 or over and have a personal or workplace pension, you can book your free appointment with Pension Wise
Under 50, not sure what pension you have, or just not ready? Pension Wise can still answer your questions. Call us free on 0800 011 3797 or use our webchatOpens in a new window
Monday to Friday, 9am to 5pm (helpline) 9am to 6pm (webchat). Closed on bank holidays.
Find out more about Pension Wise and how to use it
If so, now is the time to get debt advice
It’s free and confidential
Gives you better ways of managing your debts and money
Ensures you’re claiming all the right benefits and entitlements
