Lone Parents only need to earn £10 in a year to become self employed - Get benefits help (UK)
As surprising as this may sound, you can actually live quite comfortably earning as little as £10.00 in your first year of self-employment if you are a lone parent living in the UK and haven't worked for the past year.
What do I mean by comfortably?
Well, if you are currently on income support or jobseekers benefits, then what I mean is that you would be no worse off than you are now and possibly slightly better off depending on how many hours you choose to work.
So what's the point in going self employed to only earn such a small amount?
This isn't about me showing you how to create miracles, I'm afraid you'll have to create them by yourself but the point here is you may already have an amazing idea that will earn you a considerable amount more than £10.00 but you don't expect your business to grow very quickly.
It could be that you haven't got an idea at all, but knowing you only need to earn £10.00 in your first year might just give you some inspiration to get you started.
Whatever your reason is for wanting to become self employed, the last thing you want to worry about losing your home or not being able to fed the children.
Before I go any further I have to let you know about my disclaimer so here it goes.
By reading this, you understand and except that I am not a benefits adviser, member of any government agencies nor am I in any way qualified to advised you on such financial matters.
The view here is simply the opinion of the author and should not be taken as factual. This is for information purposes only, you accept that I cannot and will not be held liable for any loss or damages incurred directly or indirectly.
This is just me putting the idea out there. I therefore advise you to further research this subject for yourself before jumping into anything.
Ok, now that's out the way, let's get onto the interesting part.
Going self employed as a lone parent
We are fortunate that UK has a benefits system but we also have a struggling economy meaning that even if you go and work for someone else, you may still need government benefits to top up your income or to help you pay your rent and council tax etc.
When you go self employed those government benefits are still there to help you and if you are only earning a small amount then you can still receive enough to cover your weekly expenses, even if your earnings are as low as £10.00 in the first year! Of course you will eventually need to earn more than £10.00 after the first year so it's not a ticket to a free ride. You'll still have to put some hard work in if you want your business to be a success.
So what benefits help can you get?
Let's assume you have been out of work for the last year and on government benefits.
You would have received housing and council tax benefits, jobseekers (JSA) or income support, child tax credits and child benefits.
If you was to go self employed and you could only earn for example £10.00 a week or even £10.00 in the entire first year of start up, then you would still be fully entitled to all of those benefits except for one which would be your jobseekers (JSA) or your income support.
To replace your jobseekers (JSA) or income support you can claim working tax credits which is a similar amount of money depending on how many hours you choose to work, although you do need to be able to work for more than 16 hours a week to be entitled to it. (More on choosing your working hours below).
As a result, your incomings remain basically the same so you can concentrate on getting your business up and running with the added relief of knowing that your rent is paid and you can still provide for your family.
Let's break that down even further!
Please Note: All figures below are approximate.
Child Tax Credits and Child Benefits
Providing your earnings remain low, you would still be entitled to the same amounts of child tax credits and child benefits.
How Many Children You Have
Child Tax Credits
Working tax Credits
Working tax credits are paid to you based on how many hours you work and what you expect your income to be, so again if you expect your income to remain low then you would be entitled to receive the full amount as shown below.
£89.00 weekly - If you work as self employed for 30 hours or more a week.
If you can possibly work that many hours around your child/children then it would make you financially better off than if you were to choose to work a less amount of hours.
£74.00 weekly - If you work as self employed for between 16 and 29 hours.
As you can see, you would receive less money for working between 16 and 29 hours a week than you would for 30 hours but despite this, the amount is still more than you would have been receiving from your income support or jobseekers benefits which is approximately £68.00 a week.
£0.00 weekly - if you work less than 16 hours a week.
Working tax credits are not available to you if you work less than 16 hours a week. If you can't work as self employed for more than 16 hours and are expecting your earnings to remain low for a while then I personally don't recommend you start up in this way, although you could still claim jobseekers benefits but of course you would still have to look for work if you choose that option.
Authors Note: Remember when you are choosing your working hours, they are not just the time you spend at your computer or making sales that counts. You should also include the time you spend buying and choosing stock, phone calls, completing paperwork and client meetings etc.
Currently the housing pays your full rent and you pay the remaining service charges.
If your full rent is £100.00 a week, the housing pay it for you whilst you are on a low income and you pay the smaller amount of rent/service charges at approximately £7.00 a week.
This remains the same whether your low income is jobseekers/income support or self employed and generally will remain the same until you are earning nearer to £50.00 a week. In which case your rent will gradually increase as your earnings do.
Council Tax Benefits
The same applies to your council tax benefit as it does your housing benefits. They will continue to pay it for you and they will not increase how much you have to pay until your earnings increase.
Free School Meals
You will no longer be entitled to free school meals once you are in receipt of working tax credits so you would have to pay for these yourself or provide the children with a packed lunch.
If you are in receipt of working tax credits and on low income then you and your family are still entitled to free NHS. Example: doctors, dentists and prescription glasses etc. You just need to apply for a free 'NHS Exemption card'.
National Insurance and Taxes
Your working tax credits, child tax credits, child benefit, housing and council tax benefits are all non-taxable incomes so if you receive them and your business earnings are below £8105.00 (amount shown for April 2012 - April 2013) in a year, then you also won't have to pay any tax.
If you think your earnings will be low then you can apply for a national insurance exemption by filling out the CF10 self-employed people with small earnings form. Meaning you won't have to pay that either, although for the sake of approximately £2.50 a week, it could be worth you paying it anyway as it is what will give you some financial relief if you become sick or when you need a pension.
What happens after the first year?
Okay, let's say you have busted your guts off working hard for the last year and you're still not a millionaire, in fact you're still not making a whole lot more than you did in the first year.
As long as you have got determination, a friend to lean on and your business in starting to bring in a small weekly income then all is not lost.
Benefits help in your second year of self employment
Now that the second year is upon you, you are expected to have your business off the ground a bit more. This means that your working tax credits will halve so if you have been receiving £89.00 a week then you will now only receive approximately £44.50. If you want to keep your income on the same even level as the year before, then you will need to replace that other half through your business earnings.
As long as you are still on a low income then all your other benefits will still remain the same.
Benefits help in your third year of self employment
Hopefully by now, you will have established your business a lot more. You are still entitled to all your other benefits if on a low income but again your working tax credits will change. This year it will stop completely, meaning that if you want to remain on the same income that you have been on, then you will need to be earning at least £89.00 profit a week from you business income.
Year 1, 2 and 3
Year 1 - you can earn £10.00 a year and receive £89.00 working tax credits.
Year 2 -your working tax credits will halve to approximately £44.50 so you will need to be earning at least £44.50 a week from your self employed business to stay on an even income as the previous year.
Year 3 - your working tax credits will stop entirely so you will need to be earning the full £89.00 a week from your business in order to stay on an even level of income.
Obviously you probably want to become financially better off than the figures I give here, especially after all the hard work you would have put into being self employed but if at the very least, those figures are all you can earn to start with then you can at least do it with the comfort of knowing your family are secure, housed and fed.
What if you still can't make your business work
If by year two or year three, you can't earn enough profit/income to make up for the loss of your working tax credits then you may have to consider living on a less amount for a while, going back onto jobseekers or income support if they allow you to, or the possibility of working for someone else along side of your self-employment until your business is bringing in enough.
Other things to take into consideration
Your Business Accounts
If you are earning such a small amount of money then you will probably need to do your own accounts. For a small business they are easy enough once you've learned the format of how to keep them and you can probably learn how on the internet. Never overlook your accounts, it's absolutely critical that you keep them well organised and up to date, even if it is just to show your earnings of £10.00 in a year.
Your Child/Children Finishing Their Education
If you think you will remain on a low income over one year or the entire three years as I have described here then remember to consider the age of your children. If they are likely to finish their education within the next three years, your child tax credits and child benefits may stop which could potentially leave you short on money depending on how much you need to live on.
All calculations are based on you and your children having little or no savings. This doesn't necessarily mean that you are not allowed a 'small' amount of capital money for your business.
One of the main things you will learn from being self employed is that you never stop learning. Don't let now be any different, if you have just read this and seriously think it could work for you, head on out of here with your idea and double check everything for yourself and when you've done that, double check again! Remember that one suit does not fit all and your situation may vary from the one mentioned throughout this article.