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Self employment profit - Universal Credit

Sunnyuk5

Hi,

I am self employed and I usually pay myself net salary of £1600 a month after all expenses. My company makes no profit. But this month I may have a profit/dividend of £120 in addition to my monthly salary. This will be a one off. Is this profit/dividend carried forward to every assessment period which will mean I will get paid less universal credit until I make a loss to neutralise the positive balance?

Because I know losses are carried forward, although it doesn't result in an increase in uc payment.

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Alex_Alumni

Hello @Sunnyuk5 I'm afraid I lack the knowledge to answer your question directly, but to help our members find it I've marked it as unanswered for now, hopefully they can share their thoughts soon.

Let us know if there's anything else we can help with in the meantime

Alex

calcotti

Dividends are ignored for UC as income.
Your self employed earnings are always the difference between your business expenditure and business income. Dividends do not count as business expenditure and you do not declare them as income.

Sunnyuk5

Thanks.

What meant to say was I usually pay myself a director salary via paye. My business makes no other profits other than that. As after all expenses whatever is left I pay myself via paye and that rti feed is given to universal credit from hmrc. Which is then used to calculate my universal credit payments.

However this month after I pay myself a salary and deduct all other business expenses, a positive balance of £120 will be left on the universal credit income and expense assessment. How will that amount affect my universal credit payments for this month and the following months?

calcotti

The £120 will be treated as self employed earnings and there will be a deduction of £66 from your UC (55% x £120).

Sunnyuk5

Thanks. I understand £66 will get deducted on the current assessment period due to the positive balance of £120.

But will this £120 be carried forward to my future assessment periods when calculating my universal credit payments? This is taking into account that after all business expenses including paying myself a salary, I have no positive/surplus balance left over.

I'm only saying this because I noticed losses are carried forward to the next assessment period for universal credit. So are surplus/positive balances carried forward too?

calcotti

Sunnyuk5 said:
But will this £120 be carried forward to my future assessment periods when calculating my universal credit payments?

In fact if you have losses over £120 carried forward from previous months then I don't think the £120 will affect this month’s payment. Rather it will be offset against the losses so the ongoing losses to carry forward will be reduced.

Your income and expenditure are taken into account each month. A surplus is treated as earnings and an earnings deduction made. A loss is carried forward so that you can offset it against a future surplus.

https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/surplus-earnings-and-losses#Self%20employed%20losses

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1023406/admh4.pdf

Unused Losses
H4501 For the purposes of this guidance In UC an unused loss does not include the loss from an assessment period that began before 11.4.18.

H4502 A claimant has an unused loss in any previous AP, which will be used to calculate their self- employed earnings in the current AP1 as set out at H4158, if:
1. the calculation results in a negative amount (a loss) and 2. the loss has not been extinguished in any subsequent AP.

Sunnyuk5

Previous loss is around £45. It will mean that a calculation will be made against £75 instead of £120 then.

As you said it will be treated as earnings and an earnings deduction will be made, then going forward this amount should not come into any calculations for future assessment periods? This is taking into account that I have no surplus amounts in the future.

calcotti

Yes. Earnings = £120 before any carried forward losses. Carried forward losses £45. Earnings to take into account £75. Earnings deduction = 55% x £75 = £41.25 and there are no ongoing losses to carry forward. Your next calculation will be treated solely on the income and expenditure figures for that month.

Sunnyuk5

Thank you so much for the info.

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