Which forms of self employment are least stressful under current ESA rules?

jhorner

If you have a skill like creating repeat patterns digitally, or graphic design, there are various ways you can turn this into self employment, passive income streams:

- sell yearly licence to eg fabric company (likely around £250/yr per design, in control of what you charge, but difficult to get, most designers license 1-3 per year)

- sell print on demand products eg via an Etsy shop or own website (income for ESA would technically be what customer pays? Though profit margins small in reality)

- sell pattern on marketplace like Spoonflower (income for ESA purposes would be % you receive, getting around small profit margins issue, but income unpredictable and uncontrollable, might have a month massively going over £167/week then nothing)

- sell digital products eg on Etsy (simpler than POD physical products and proper passive income with large profit margin, but very unpredictable might have a month massively going over £167/week then nothing)

- create a YouTube channel to teach the skill, or document your journey, and eventually get ad revenue and affiliate link income (very slow which might have some advantages on ESA but not very passive, requires ongoing input. Unpredictable and uncontrollable income)

- create Skillshare courses to teach the skill (probably requires proving yourself in one of the other streams first, unpredictable and uncontrollable income)

- sell own course directly from your own website (could control income by limiting places or making it great value, but would be hard to get students, probably substantial advertising costs)

- sell pattern as a buyout (not royalties, one expensive product eg likely £300-400, might sell one or two a year but would be in control of how much earned)

- start with freebies, deliberately not making income. It’s currently very popular for small brands to offer free products (usually in return to subscribing to an email list) but normally also with upsell side products. For people on ESA it might make sense to heavily lean into this strategy until you have a strong email list and following? In this context it would be free printables. I don’t know how this would fit with DWP rules - is it a hobby until your first sale? Or is it Permitted Work from the moment you offer a freebie from your brand? Is there a clause re offering something for free which you could charge for? 

From surface designer survey data, teaching surface design/art skills is in reality the most lucrative income stream, though print on demand products is the most used income stream. Of course people not on ESA would be sensible to gradually grow all of these streams, but that doesn’t seem a likely good answer if we still need ESA due to fluctuating ability to work or limited capacity to work normal hours.

I’m scouring through the ESA legislation trying to work out which option would be least stressful to start with in terms of
- likelihood of losing contributions based ESA for unreliable, spiky income (and end up worse off)
- excessive HMRC paperwork I’m not well enough to complete or hassle from the DWP 
- difficulty with future ESA assessments if I show some capacity to work (my health fluctuates and I’m housebound, so can’t access conventional employee work)

I’ll post a reply to myself in a minute going through the wording of the legislation and asking questions, but I’m also interested in your lived experiences or what you’ve heard from other disabled people. Unfortunately, many fewer of us would be on the correct benefits to start with if we had blind faith in DWP staffs’ ability to honourably follow the legislation. I don’t want to contact the DWP until I properly understand how it should work. 

I could also start a poll about these options, so let me know if you’d be interested in that. 

Alex_Alumni

Thanks for sharing your thoughts on this topic @jhorner I'm sure our members will appreciate such a detailed post Sorry it was caught up in the spam filter, but it should be okay to post now!

jhorner

So onto the legislation. This isn’t a fun or easy read, but seems like the best place to start working out how the process should work. 

My initial reaction to the legislation, as I read it, is that it’s best to either find a 45 (5) programme aimed at disabled people (which circumvents the £167 limit?), or to find a self employment income stream where we can control what the maximum income is per week or month. Plus it seems best to have a business model where it isn’t complicated to work out the expenses aspect of the business (eg what comes into our bank account is the profit and not what the customer paid). 

Find the full ESA regulations here: 

https://www.legislation.gov.uk/uksi/2008/794/contents 

Under standard Permitted Work there’s a lower limit of £20/wk (presumably they don’t want to do the paperwork under that?) This year the £167 upper limit must be what 16x minimum wage is? 

Clause 45 (5) is interesting though because it doesn’t mention an upper limit and seems like it might be more sensible about the realities of becoming self employed. But do any schemes currently fall under this? It also requires looking up Section 2 of the Employment and Training Act 1973 and probably for me in Scotland the Enterprise and New Towns Act 1990

Section 2 of the Employment and Training Act 1973:

It does include provision for exceptions/schemes targeted at women and disabled people, though it seems to need to come from the Secretary of State or Scottish Enterprise, I don’t think any small charity can simply say they’re providing a scheme like this. 

The Scottish version includes same but also for ethnic minorities

So more research required on whether anything like this currently exists (for me in Scotland), as not having a £167 weekly limit clearly removes some startup stress. Didn’t a scheme under this end though? 

Self employment specific 

There’s not one neat section for everything self employment related, you do need to read several sections, but this bit is most relevant https://www.legislation.gov.uk/uksi/2008/794/part/10/chapter/4 

The Scope site says 

“When you claim ESA, you can earn up to £167 net profit a week. Net profit is the amount of money you take home after tax and National Insurance.

When you are self-employed, you can deduct reasonable expenses from the money you earn. Expenses should be things that help you run your business and cannot be used for other purposes.

For example, your expenses for 1 week could be £50. You’d then take away £50 from your income that week when reporting your earnings to DWP.”

That makes sense, but my reading of the legislation is different

I’m hoping I’m reading it wrong, but it seems like you’re not able to deduct any losses, or setup and expansion costs from what’s treated as net profit. Expenses can be deducted but only related to the employment. My interpretation is I could deduct something like travel costs for a meeting (would never be relevant for me) but I wouldn’t be able to deduct the setup and expansion costs for the business, such as advertising (which is likely core to setting up some of these business models). Also due to advertising costs it’s likely the first year would make a loss, but if I make some sort of income by year 2, the previous loss would be ignored. 

Also, these clauses seem to rule out the possibility of setting up a limited company and then employing ourselves on a steady permitted work wage, as an employee? Perhaps that is the point though? 

Royalties and time periods for earnings

The royalties part of Regulation 92 seems very interesting for passive income streams such as licensing a pattern for a year, but I don’t understand what this is saying! Please can you translate what this means if in July I sell a year licence for £300 (with my copyright) or alternatively sell a pattern to a marketplace on a % royalties basis which works out as £300/year starting in July. 

This seems to be the most important bit for people like me to understand and I don’t 🤷🏻‍♀️

jhorner

For people like me and @djn2023 starting an Etsy shop seems like one of the least intimidating ways to try out self employment, so in true 2023 style I asked AI chatbots for input (Bing, ChatGPT and AIvsAI): 

Asking AI re limiting passive income 

If I start an Etsy shop are there ways to initially limit my weekly income to under £167?

TLDR AI ideas: limit stock or download number available; set a low price so you’d have to sell loads to get to £167, or weirdly set a high price (presumably so people are unlikely to buy?!); offer discount codes so customers more likely to consider shop good value; pause or remove listings when you’re getting close to the limit (does this have to be done manually?); go into vacation mode; choose a niche that has a low or predictable demand, offering limited edition or custom items; set limited shop hours (is this a real option? Told to adjust Shop Status options); limit advertising so unlikely to reach many people; set maximum order limit per customer; set longer processing time to slow down sales (not sure it would slow down income though?); manually send digital downloads customers so income wouldn’t get unpredictably out of control. 

I have their full answers saved in a google doc if anyone wants more details. 

Would anyone be interested in a YouTube channel exploring these types of options? (which I could eventually monetise 😆). It seems to me quite an amusing counterpoint to all the videos telling you how to get rich quick using Etsy. 

Sources: Conversation with Bing, 26/04/2023

(1) 10 Must-Know Tips to Make Money on Etsy in 2021 | Printbest. https://printbest.com/blog/the-top-10-must-know-tips-for-how-to-make-money-on-etsy-in-2021 /.

(2) How Much Can You Make on Etsy? 3 Sellers Share Their Income Report - Alura. https://www.alura.io/post/how-much-can-you-make-on-etsy .

(3) How to Earn Passive Income on Etsy With Digital Downloads - Mum's Money. https://mumsmoney.com/passive-income-on-etsy/.

(4) The Ultimate Guide to Taxes for Etsy Shop Owners. https://www.etsy.com/seller-handbook/article/267927046529 .

(5) How To REALLY Make Money On Etsy in 2023 - Niche Pursuits. https://www.nichepursuits.com/how-to-make-money-on-etsy/. . 

Pseudonym

Great thread. It has given me things to consider if I ever decide to go down the self employed route as a micro-business. I can't answer your questions, not least due to brain fog right now, but I have just posted to ask about business capital and whether this affects means tested benefits.