All self-employed people are eligible to make a claim for Council Tax Reduction, no matter what the nature of the business. This includes people who are sole traders, those who jointly run a business, those who run a business which also employs others, child minders, taxi drivers and anyone who may be a director of a company. This list is not exhaustive.
What evidence of earnings do I need to provide?
When looking at the income of the business we will ask you to provide your last thirteen weeks income and expenses figures, this will enable us to see how your business is trading in the current economic situation. We will ask you to complete a self-employed income and expenditure form, which should be completed with your last 13 weeks details, you should also provide receipts for business expenses. You will also be asked to provide a copy of your most recent year end accounts, i.e. profit and loss and balance sheets. This will enable us to compare how your business traded in your last full year, to the current thirteen weeks details that you will provide.
With regards to taxi drivers, we have a separate taxi driver income and expenditure form for completion, as the information we require from taxi drivers differs from that of other self-employed.
If you are only just starting out in business and are unable to supply any records, we will still ask you to complete the self-employed income and expenditure form for the period of time that you have been trading and request that you provide an estimate of your income and expenditure for a forthcoming period of time. The estimated period of time will usually start from the date you are completing the self-employed income and expenditure form and the forthcoming thirteen weeks.
If you visit either Sefton One Stop Shop for help in completing the self-employed income and expenditure form you will need to bring along any weekly record book you keep, showing your income from the business and any expenses you have incurred. You should also provide receipts for expenses, i.e. receipts for petrol/diesel, goods purchased, utility bills paid, insurance premiums, telephone bill's, rent paid on business premises and any other relevant business expenses.
What is my income for benefit purposes?
Once we have received all the details of your income and expenses we will then calculate an assumed weekly income from your business on which to calculate your benefit claim. This will be reviewed periodically by us and you can also ask for your income to be reviewed at any time.
The income we will include will be all monies coming in to the business, but may not include certain sums of capital paid in to the business during the period being looked at.
We will then take off any allowable expenses that are wholly and exclusively incurred by the business. Examples of allowable expenses are listed below:
- Rent paid on business premises.
- Purchases of stocks and supplies.
- Advertising, postage and stationery.
- Fuel and other vehicle running costs.
- Wages paid for staff employed by the business.
The list is not exhaustive. In looking at the expenses of the business there are certain expenses that we do not allow, which the Inland Revenue do, such as depreciation.
How is self-employed income worked out?
Total income minus any allowable business expenses = Pre-Tax Profit
Pre-tax profit minus notional income tax, notional National Insurance contributions and half of any pension contributions = Net Profit
We will calculate your notional income tax and National Insurance deductions ourselves based on your net profit figure. These figures may differ from the figures worked out by the Inland Revenue.
Self-employed child minders
Child minders are treated differently. We simply use a third of your gross weekly takings to calculate your income. We do not take any expenses into account.
Where can I get help to complete my form?
We understand that this may be the first time that you have applied for benefit and the information that we request may seem daunting, but we would ask that you do not let this put you off making a claim for benefit. You can either visit one of the Sefton One Stop Shop offices in either Bootle or Southport or phone the Contact Centre on 0345 140 0845. Or email any questions to firstname.lastname@example.org
The Minimum Income Floor (MIF) for Self-Employed persons
If you make a new claim for Council Tax Reduction after 31/3/2018 and you are not in receipt of UC, once your business has been running for 12 months or more, your claim for Council Tax Reduction could be calculated on your income from self-employment as outlined above or the Minimum Income Floor, whichever is higher.
The Minimum Income Floor is an amount of money that is equivalent to what you would receive if you were employed for 35 hours per week at minimum wage, after deducting an amount for income tax and national insurance contributions.
The MIF supports the basic principle or premise that once you have been running a business for an initial 12 month start up period your business should be providing you with, as a minimum, the equivalent of a full time income at minimum wage.
The council will not apply the minimum income floor in the following circumstances;
- You or your partner are carers and have an entitlement to Carers Allowance
- You or your partner are paid as an employee by an employer
- The council decide that your business was never intended to be gainful self-employment, meaning that the business was never intended to be your main employment or source of income.
- You or your partners have a disability for which you receive certain DWP disability benefits (e.g. Personal Independence Payment).
- Company Directors (registered with Companies House)
If you experience hardship as a result of the MIF being used to calculate your entitlement, you can make an application for additional help with your council tax through the council’s exceptional hardship fund. Further information about this is given about this extra help further down this webpage.