Can you start a side hustle business on Universal Credit?
HOME / / Can you start a side hustle business on Universal Credit?
We believe everyone interested in entrepreneurship deserves some help to make it happen, no matter your situation.
But getting started whilst claiming benefits can be confusing (and sometimes a tad uncomfortable to talk about).
Team Smarta want to help.
The information provided in this article was correct according to Gov.uk on 7.10.22. Please check the current benefits advice, rules and allowances, which may have changed since this article was published.
The cost of living crisis is already dampening UK spirits and now that R word (recession) is looming like a dark cloud. Quietly making some extra cash has never been a more attractive option.
But the cold truth is, if you’re in receipt of Universal Credit (UC) and fail to declare the additional money you make, you could come up against “payment blockers”, sanctions, and even have to pay money back.
How is Universal Credit entitlement calculated?
There is a “work allowance” which means you can earn a certain amount each month before Universal Credit start reducing your benefits payment. Your allowance depends on whether you have a disability or health condition that affects your work, and also whether you have children. Once your income exceeds this amount, 55 pence will be deducted per £1 you earn. Take a look at HMRC’s example calculations.
If you’re employed, even just a few hours a week, the Universal Credit team have full visibility of how much you get paid. HMRC’s system feeds this information directly into your UC account, so you do not have to report any changes to your wages.
What you DO have to report - either to your Work Coach, the Job Centre, or on your Universal Credit journal - is any additional income you bring in through self-employment or freelancing.
Whether it’s cash in your hand, or money in your bank (including PayPal), this extra income needs to be taken into consideration by UC so that they provide you with the right amount of financial support, without you having to pay any of it back.
Didn’t the rules for claiming Universal Credit change because of Coronavirus?
Yes they did, but they’ve now been changed back. The rules for self-employed people claiming UC were temporarily different because of the coronavirus pandemic. But since 31 July 2021, all of the pre-pandemic rules apply.
If you’ve told Universal Credit you’re earning through self-employment, they will check whether this is your main work, known as 'gainfully self-employed'.
Your work coach or UC agent will be able to explain how their decision will affect your future payments, as well as any income you might be receiving from the Self-Employment Income Support Scheme (SEISS).
But I’ll be better off if I don’t report my extra income, so why would I?
Your commitment to Universal Credit means you could be asked at any time to provide evidence to support your UC claim, including bank statements and other documents to prove your financial situation actually matches the information you’ve given.
Whilst your work coach or UC agent has no way of knowing what you’ve actually earnt through your side hustle, keeping it on the down low is a risky game to play, especially if you rely on your UC payments to help you cover childcare costs, rent and household bills (which are going up at a frightening rate).
Failing to keep up with your UC commitments could also mean you miss out on extra payments the Government is making to help with the cost of living.
OK, how do I stay on the right side of Univeral Credit whilst side hustling?
To keep receiving the UC you’re entitled to, report any changes to your circumstances promptly - either through your online account or by calling the Universal Credit helpline. This includes changes to your work and income.
Your Work Coach will make a decision on whether or not you are ‘gainfully self-employed’.
This depends whether you earn more from your side-hustle than from the work you do for your employer. Either way, you’ll need to follow specific rules for reporting income and expenses to Universal Credit.
You’ll see 'Report income and expenses' appear in your UC To-Do list at the end of every monthly assessment period, even if your income is zero. Your Universal Credit will stop until you do this.
Read about how to report your self-employed income and expenses to Universal Credit
My side hustle is going well. When is my Universal Credit going to stop?
Once you report an income (minus expenses) of £2,500 or more, your UC payment will automatically reduce to zero.
If your side hustle has taken off so that you no longer need your employed job as well, great! You are officially ‘gainfully self-employed’! You can enjoy being your own boss and all the benefits that go with it. Watch this video of Chelsea’s journey from side hustle to main hustle.
But what if I’m making a loss?
Making a loss means the 'money in' from your side hustle was less than your 'money out' in a particular month. Universal Credit will treat your self-employed earnings as £0.00 if you report a loss. The loss may be carried forward to the next month when they work out how much you’re entitled to in benefits for that period.
Once you start making a profit, that side hustle income will be taken off the total amount of your losses.
Your Work Coach can advise you on how to increase your earnings. You can also refer to more of our free Business Advice articles plus find helpful Resources on our sister site Smarta.
We don’t believe entrepreneurs have to look like Alan Sugar or‘Richard Branson.
That’s why we share stories that showcase the fantastic diversity that’s out there in the UK’s small business community.
Take a look
"We’re delighted to be the 2000th loan recipients!"