Employment and Support Allowance (ESA)
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Permitted work and self employment - How to account for earnings.

mayfishmayfish Member Posts: 4 Listener
Hi, community,

I've been speaking to a Scope benefits advisor about this and they suggested I ask the community, while she looks elsewhere for answers.

The basic scenario is that I am starting to do a few (less than 16 hours) per week as Permitted Work on a self-employed basis. I'm going to start to make sewn goods (bags, homewares etc) for sale on the internet.

I'll have a stock of both supplies (fabric, cotton etc) and finished goods (begs etc) and I'll be selling the latter by the internet and then maybe markets.

I have been buying stock over the past year when I see things cheap. For the example, I'll say I have spent £1000 on stock.
 
In any week I might sell a bag for £60, but closer to Christmas, mothers or fathers day I might sell  £180 in a week which would take me above the permitted amount. I have over the year been making less than £125. 

The first question is how will they work out the weekly earnings with the seasonal income?

The second questions is if each bag costs me to make £40 (including all materials, but excluding overheads of the room I make them in), and in any given month those overheads are £50. How for the DWP do I declare profits?

I have only just started to get to the point of marketing my goods, but have incurred a cost of £1000

Will the DWP want me to declare any money owed over £1000 as the sales and the year proceeds (I know the Inland Revenue aren't bothered until sales reach £1000 or will they want me to work out the cost for each bag and declare profits? 

I guess I'm not the first person to be in this situation, but if you have any experience please get in touch. Similarly, if you know of any guidance relating to this, please send me the link.  

Thanks in anticipation.

Replies

  • BenefitsTrainingCoBenefitsTrainingCo Member Posts: 2,692 Pioneering
    mayfish,

    Good question. Self-employed earnings & permitted work. According to the regulations you have to work out your net profit - after reasonable expenses, tax and national insurance. To answer your first question about seasonal income, you can average your self-employed earnings over one year, or if you've only recently started self-employment, a more appropriate period - it sounds as if you've been doing it over a year, so you can use your average, which is less than the £125.50 limit. The DWP refer to the period over which earnings are averaged as an assessment period.

    To answer your second question, I don't think the DWP will be interested in the profits per bag - it's your profit over the assessment period they are using which matters, not per item (so for example, over a year, or perhaps less). It will help to understand what expenses do and don't count (for example, capital expenditure on a fixed asset such a sewing machine wouldn't count).

    But assuming the £1000 has been on things like material etc, then you need to add your other overheads to that (your costs for the room, which you've estimated at £50 a month). So I make that £1600 over the year? On that basis, you then look at what you make above that over the course of a year.

    Remember that what the DWP are looking for is a weekly amount of earnings, but it can be based on an average over a year (or another representative period - whatever they are using as the assessment period).

    Finally, I expect the Scope adviser will find this too but there's no harm in looking at the Decision Maker's Guide volume on self-employed earnings for ESA. It has lots of practical examples and although it is long, there will be bits that don't apply to you. If you look at para 50051 that is where it starts to discuss the assessment period - in other words, the period of time over which to average self-employed earnings.

    I hope that helps.

    Will
    The Benefits Training Co:
    Paul Bradley
    Michael Chambers
    Will Hadwen
    Sarah Hayle
    Maria Solomon
    David Stickland
  • Pippa_AlumniPippa_Alumni Scope alumni Posts: 5,851 Disability Gamechanger
    Hi @mayfish, I hope the above response was helpful, and best of luck with your business!

    You may also find this page on self-employment and benefits to be helpful. Have a read, and do come back to us with any further questions.
  • mayfishmayfish Member Posts: 4 Listener
    Hi Will, this is great. I'll have a good look. Its very technical, but I do my best at absorbing it! I'll also pass it onto the advisor. Thanks again. Paul 
  • whistleswhistles Member Posts: 1,590 Disability Gamechanger
    You can only earn £19.20 net profit a week before you go over the trading allowance. Then you need to register as a business.

    You need to work out your mark up. If you sell one bag at £60 that's on the borderline of what's permitted that week, if you spent £40.

    Making to order would be my way forward. Then you don't tie up materials as finished stock.  :)

    Do not follow me, I don't know where I am going.
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