A guide for self employed Housing and council tax benefit advice
Equal Opportunities Statement Gravesham Borough Council is committed to ensuring that no service user or customer is discriminated against on the grounds of ethnic / national origin, gender, disability, age, race, colour, sexuality or religion. Leaflets available: Help with rent and Council Tax for Working Age People (L008) Help with rent and Council Tax for Pensioners (L007) Can my Housing Benefit and Council Tax Benefit claim be backdated? (L006) Changes you need to tell us about (L010) A Guide for the Self-Employed (L012) Discretionary Housing Payments - Extra help towards your rent & Council Tax (L003) Appeals - What do I do if I disagree with your decision? (L005) A guide to Overpayments and Debt (L009) A guide for Landlords and Agents (L004) A guide to Local Housing Allowance (L014) A guide to Local Housing Allowance for Landlords and Agents (L013) A guide for Students (L011) You can get the above leaflets in large print.! Please note that whilst every effort has been made to ensure that the details given in this leaflet are correct, the information should not be treated as an authoritative statement of benefit regulations. 2
Can I apply for Housing Benefit and/or Council Tax Benefit if I am self-employed? Yes, if you (and your partner s, if you have one) total savings are under 16,000. If you or your partner are working age, savings below 6,000 are ignored. Savings above 6,000 will reduce the amount of benefit you will get. Please note that if you have a partner both your savings will be added together and the same 6,000 rules applied. How will you work out whether I am entitled to Benefit? We decide whether or not you are entitled to Housing Benefit and/or Council Tax Benefit based on you and your partner s income, savings and personal circumstances. Complete a Housing Benefit and Council Tax Benefit application form and send us your latest audited business accounts or the accounts you provide for HM Revenue & Customs - we will need to see originals as proof of your self-employed earnings. What do I do if I do not have audited accounts? If you do not have audited accounts or they are not up to date, you can fill in a self-employed earnings information form. You can pick up this form from our Civic Centre reception. We will work out your weekly earnings (after tax, National Insurance and allowable expenses) from your business and add this to any other income you and your partner receive. If you have only just become self employed and you are unsure of your likely earnings, please contact us for further advice. 3
What if I have not been trading for a full year? If you have not been self-employed for a full year you can still complete the self-employed earnings information form. This asks you for the income received, expenses occurred and details of the trading period. You can also indicate if the income you have told us about reflects what you expect to receive over the next six months. What if my trading position has changed since the accounts were audited? We will use your latest accounts as these usually provide an accurate picture of your trading position. However, if your business activity has changed significantly since these were audited, it may be possible to work out your benefit using more recent figures if you can provide sufficient evidence to support them. Please contact us to discuss the evidence we would require. You must still send us an original set of your accounts with your completed Housing Benefit and Council Tax Benefit application. How will you work out my earnings? To work out your weekly earnings for benefit, we first need to work out your businesses gross profit before allowable expenses. We will take away any amounts you have had to spend to run your business (we do not take away any personal or household expenses or savings). We then work out your weekly income based on this and take away tax, National Insurance and 50% of any private pension contributions you make, to give us the amount we need to work out your benefit. Please note that we are unable to accept your Tax Return as proof of your self-employed accounts. N.B. Allowable expenses for Housing and Council Tax Benefit purposes are different to those allowable by the HM Revenue & customs. 4
Business income includes: Payment received for goods or services Tips and gratuities Rent from business premises Interest on monies in banks VAT collected Start up funding. What about my savings and personal expenses? When we work out the profit of your business, we will add back in any savings you take from the business or any household or personal expenses you pay from the business. We work out your weekly earnings for benefit purposes using your share of the profit of the business. Business Partnerships If you are employed in a partnership your net weekly earnings (after tax and National Insurance) will be based on your share of the business profit. Unless we are told otherwise we will assume that you all hold an equal share of the business. Self-employed childminders If you are a self-employed childminder we will use one third of your gross earnings to work out your benefit entitlement. No expenses are taken into consideration. Company Directors If you have established a company and are a Director of it, you are regarded as being en employee and not self employed. 5
Examples of allowable expenses Running costs (light, phone, heat, etc) but they may be reduced to reflect personal use Goods bought for resale (stock) Wages (including NI) for employees Rent, rates and mortgage payment on the business premises Hire purchase and leasing charges Legal and accountancy fees Tax and National Insurance 50%of pension contributions Business mortgage loan interest Capital payments on a loan used to repair/replace equipment Bank and insurance charges Repair costs Proven bad debts and recovery Excess VAT Subscriptions to trade and professional organisations Advertising, telephone and stationery 6
Non allowable expenses include: Other capital expenditure Depreciation Purchase of business equipment Cost of expansion or setting up business (other than interest) Personal drawings Losses before business period Any sum for domestic / private use Business entertainment Proven for bad debt Expenditure not reasonably incurred Money owed by the business to creditors Calculation Allowable expenses, along with notional tax and NI (Class 2 and 4) are deducted from the total income to give the net income which is used in the assessment of benefit entitlement. Any other income (including Tax Credits, benefits, pensions etc) and capital is also included in the assessment of benefit entitlement, alongside the net income figure. 7
Tax and National Insurance Contributions Allowances are made for income tax and national insurance contributions (NICs). However, we must work these out ourselves based on the your pre tax profit. The figures that we calculate are known as notional income tax and notional NICs and may vary from the actual amount you pay. Income Tax Tax Bands 2011-12 2012-13 Lower Rate Tax Band 2,560 2,710 Tax in Band 256 271 Rate 10% 10% Basic Rate Tax Band 0-35,000 0-34,370 Rate 20% 20% Higher Rate Tax Band 35,001 + 34,371 + Tax in Band unlimited unlimited Rate 40% 40% Allowances & Reliefs 2011-12 2012-13 Personal allowance 7,475 8,105 National Insurance Class 2 (Self 2011-12 2012-13 Employed) Zero rated 5,315 p.a. 5,595 p.a. allowance Rate Payable 2.50 p.w. 2.65 p.w. Class 4 Band 7,225-42,475 7,605-42,475 Rate payable 9% 9% Above upper limit 2% 2% 8
What can I do if I disagree with your decision on application for Housing and/or Council Tax Benefit? If you disagree with our decision, you can ask us to look at it again. You must write to us within one calendar month of the benefit decision notice. For more information see our leaflet Appeals - What do I do if I disagree with your decision. A-Z of useful words Audited Accounts - Accounts prepared by an accountant Gross - Earnings before business expenses have been deducted. Net - Earnings after allowable business expenses have been deducted. Notional Tax & - Estimated figure based on the information Notional National you have supplied Insurance Seasonal - Short-term employment based on the time of year, for example, deckchair attendant. Sub-contractor - Where your tax is paid by the contractor and you are responsible to pay your own National Insurance. Company Director - Where you have a share in the business, but are a paid employee. 9
i Where Can I Get Help? You can always phone us for help and advice. For details visit our website www.gravesham.gov.uk or see the back of this leaflet. You could also contact your local Citizens Advice Bureau or Shelter Kent Housing Aid. Citizens Advice Bureau Gravesend 44 Windmill Street Gravesend Kent DA12 1BA Call 01474 33 12 39 Shelter Kent (North) Housing Aid Centre 2 Ordnance Street Chatham Kent ME4 6SL Shelter is a charitable organisation that offers independent housing aid consisting of confidential advice, assistance and active support on a wide range of housing problems. Their advice service is free of charge and operates independently from Gravesham Borough Council. Personal callers are dealt with between 10am and 1pm on Mondays and Fridays, and between 2pm and 4.30pm on Tuesdays and Wednesdays. The centre is also contactable by telephone. A telephone advice line (01634 81 11 66) is available between the hours of 10am and 1pm on Mondays, Tuesdays, Wednesday and Fridays, and between 2pm and 4.30pm on Thursdays. If you need to contact Shelter outside these hours, please ring the number shown above and leave a message on the answer phone a housing adviser will contact you as soon as possible. Alternatively, call the national free phone number Shelterline, 0808 80 04 444 10
If you have any questions about your Housing Benefit or Council Tax Benefit. Phone us on: 01474 33 77 10 The telephone lines are open Monday to Friday 9am to 5pm A service is available for minicom users on: 01474 33 76 17 (for textphone users only) Write to us at: Benefit Section Gravesham Borough Council P.O. Box 80 Gravesend Kent DA12 1ZQ E-mail us at Housingbenefits@gravesham.gov.uk Visit our Civic Centre office at the following times. Monday to Friday 9am - 4.30pm What if I want to comment on your service? We value all comments regarding our service and would like to hear from you as we are committed to providing a high quality and accessible service. All comments regarding this leaflet or any aspect of our service are welcome. You can contact us in the following ways: Visit us at the Civic Centre, Windmill Street, Gravesend. Phone us on: 01474 33 77 10 Minicom users on: 01474 33 76 17 Email us at: Housingbenefits@gravesham.gov.uk Switchboard Minicom Website 01474 56 44 22 01474 33 76 17 11
Leaflet L012, April 2012 12