Posted on 07/03/14 · Posted in Uncategorized

The UK currently has a complex benefits system, some of which are means tested according to your income and some of which are only available if you work less than a certain number of hours per week (less than 16 hours per week is quite typical).

People working in their own businesses will generally not be entitled to these minimum hours-based benefits, but the means tested benefits will be relevant, particularly when the business is just starting out.

The most notable of these means tested benefits are:

  • Working Tax Credit and Child Tax Credit
  • Child Benefit
  • Council Tax Benefit and Housing Benefit
  • The forthcoming Universal Credit

I will explain each of these in more detail in future blogs, but I want to use the rest of this post to answer the question I’m easily asked most often – which usually goes along the lines of:

I’ve heard that if I don’t take income out of my company I can claim more benefits?

This is true to an extent. Entitlement to many benefits is based on income (which can be defined in different ways) and it is possible for company owner-managers to refrain from taking income out of their companies (perhaps drawing on loans created when the business was incorporated), which increases entitlement to benefits.

Many of the benefits do have rules to deal with situations where people use their companies to deliberately manipulate their income to gain higher benefits. Historically, however, these rules have often been flouted and seldom enforced. I will explain these income deprivation rules in more detail for each of the benefits listed above in the relevant blog, where they apply.

Paul

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