Benefits and funding for the newly self-employed

Annie 4th Apr 2024 3 Comments

Reading Time: 10 minutes

Article updated 4th April 2024

Did you know there’s support for the newly self-employed? Even at this difficult time, there are still many resources of financial and business support you can access.

If you’ve found yourself with a sudden drop (or total loss) in your earnings, being self-employed could be the way to go.

So, what help is available for the newly self-employed?

• Universal Credit
• Help to Save
• Access to Work
• Personal Independence Payment
• Business mentorship
• Prince of Wales Trust
• Startup funding
• Peer-to-peer lending and ‘angel investors’
• Crowdfunding
• Local authority funding
• Social enterprise funding
• Training grants
• Apprenticeship funding

There’s a lot to get through, so let’s get started!

Universal Credit and Self Employment

Universal Credit is a flexible benefit. You don’t have to be out of work to access it. When you’re self-employed, you’ll submit a monthly assessment of your income and expenses.

When your net profit is below a certain amount (depending on your circumstances), you’ll receive some or all your Universal Credit payment. The months you earn more, you’ll receive less or no Universal Credit.

This means you can continue to be a UC recipient until your business returns a solid income every month. Unlike Job Seeker’s Allowance, which stops as soon as you find work, UC is an ongoing safety net.

You will need to prove that you are ‘gainfully self employed’. This means that:

1. Your job is your only or main income
2. You have regular work
3. You can show business activity, such as client invoices

There is something called the Minimum Income Floor. This varies from person to person, and is based upon what someone on PAYE in a similar role to yours would earn at National Minimum Wage. If you earn over this amount, your Universal Credit is worked out based on what you’ve earned over this floor (so deductions are made from your earnings to the level of the MIF). If you don’t meet the MIF, your Universal Credit deductions are based on what the MIF would be. The MIF only applies if you are not in a start-up period (see below) or you are gainfully self employed. If you are not gainfully self employed (for example, you have a main PAYE job and a small self-employed job on the side), the MIF won’t apply.

If you’re just starting out, you have one year during the launch of your business to get Universal Credit support without a MIF applied. You don’t have to look for other work, though you will meet with your work coach every few months. Your Universal Credit is based on your monthly income – and losses (such as a month where your expenses outweigh your income) are rolled to the following month.

Universal Credit eligibility

There are some limits to accessing UC.

You must:

1. Have less than £16,000 in capital or assets
2. Not own a second property
3. Apply jointly with your partner if you live together.

This means if your partner earns above a certain amount, you won’t be eligible for Universal Credit. You don’t have to be married – if you live with your partner, their income is taken into account.

Universal Credit, Self Employment, and Disability

Self employed people who claim Universal Credit but have a disability or mental condition which affects their ability to work full-time will be able to apply for a Work Capability Assessment. You will be assessed to decide if your health impacts your self employment opportunities, and could be placed in one of two groups for extra financial support if it is deemed your health puts you at a disadvantage to finding work. You will either be in the Limited Capability to Work group or the Limited Capability for Work and Work-Related Activity group – the former has some additional financial support, the latter has more (how much depends on your circumstances).

If you are found to be in these groups, other exceptions may apply – such as removing the requirement to meet the Minimum Income Floor after a start-up period.

Help to Save

If you do qualify for Universal Credit, you can plan to open a Help to Save account, too.

Once you earn above £793.17 in one monthly assessment period, you can apply for the account. You don’t need to earn this income every month – just the once. That’s your household income, too – so the £793.17 can be the total earned between you and your partner in one month. You can both open a separate Help to Save account.

Help to Save is a useful savings account with a hefty government bonus. Save between £1 and £50 each month, and the government pays you a bonus worth 50% of the highest balance you’ve saved.

The account lasts for four years, and the bonus is paid to you in year 2 and year 4. The maximum bonus you can receive is £1,200 (£600 in both year 2 and year 4). After the fourth year, it automatically closes and you can’t open another one.

This extra money – and savings habit – is a great way to make sure you’re setting aside some money for your tax bills. Things like Payments on Account can take newly self-employed people by surprise, so an emergency buffer like this helps.

Read our in-depth Help to Save article to find out more.

Access to Work

A little-known resource, Access to Work helps people with disabilities get the right equipment or help to do their job well.

Employers can access the scheme to receive a portion of costs for special equipment. Self-employed people, however, can use the scheme to have most or all of the cost covered.

The grant covers things like desk equipment or speech-to-text software. It can also cover things like assisted travel to and from a workplace, or support worker services. You can also get help with work support such as ADHD counselling and work coaches, to help improve your productivity and find ways to cope in work environments.

Access to Work is not taxed and doesn’t have to be paid back.

How to apply

To be eligible, you must have a disability (a chronic physical or mental condition that affects your day-to-day tasks). You don’t have to receive disability benefits to qualify. You’ll also need to be in paid work (including self-employment) or due to start paid work imminently.

First, apply online for an Access to Work grant. There’s a slightly different scheme to apply for if you live in Northern Ireland.

You’ll be asked about your health condition, how it affects your ability to work, and what equipment you need to help.

Next, someone will come to assess your needs either at your office or home (if you’re working from home). If, for example, you need a special desk chair, they’ll measure you for this at the same time. You may not require an assessment to receive your grant – or your grant could be delayed until assessments are available again.

If your grant is accepted, you’ll receive the report along with information about the equipment and supplier. You can then order that equipment from the supplier – and either pay direct and be reimbursed, or have Access to Work pay the supplier direct.
If you work from home, you may have to pay a portion of the cost (usually around 7%) if the equipment could be used for personal use. For example, if you order a foot rest for your desk, but use your computer outside of work hours, this is personal use.

Personal Independence Payment (PIP)

Personal Independence Payment is not means tested, which means you can apply whether you’re in work or not. It is designed to help people cope with the extra costs that come with having a disability. This might be hiring support workers, getting taxis if you can’t drive or walk with ease, or even things like getting a cleaner once a week so you can focus your energy on work-related activity instead.

You can spend your PIP on whatever you need to, in order to make your life a bit easier living and working with a disability.

There are two parts to PIP, and a lower and higher rate for each. You might qualify for one or both, at whichever rate an assessor deems suitable. The Daily Living component is £68.10 for the lower rate or £101.75 for the higher rate each week. The Mobility component is £29.60 lower rate or £71 higher. Qualifying for one component does not necessarily qualify you for the other.

Find out more and how to apply here.

Business Mentorship

Not strictly a funding opportunity or a benefit, but business mentorship programmes are a great place to start when you set up your business.

Your local Job Centre and your Citizens Advice Bureau will have plenty of advice about accessing local business mentorship schemes.

Getting a local business mentor means you’ll have access to important networking opportunities. They’ll also know where you may be able to access grants and funding on a local level, too.

Some local authorities run a business mentorship programme with lots of free workshops to educate new business owners on everything from marketing to managing taxes. You may also be able to access free (or very cheap) co-working office space, equipment, or storage units for inventory.

Prince of Wales Trust

The Prince of Wales Trust offers business mentorship and funding support to entrepreneurs aged 18 to 30, inclusive – so if you’re already 30 you can apply.

The Trust has an excellent reputation for helping young people launch their careers. Its team offers mentorship and support, from business planning through to funding applications and beyond. You can also access the Development Awards for some training grants, too.

Take a look around the website to see if they can help.

Startup Funding

If you can start your business without borrowing, that’s a great position to be in. However, most new business owners will need to borrow some capital to get their business off the ground.

Startup loans offer a low-cost way to fund your new business plans. You don’t need the same established business requirements of a typical business loan, either. For example, you don’t have to have several years’ accounts to be approved for a loan.

Shop around for your startup loan. Like any other loan, some deals are better than others. Borrow only what you need – not the maximum amount available. This helps keeps costs down in the long-term without impacting your short-term cash flow.

Try the Startup Loans Company or Funding Circle as a first stop.

Peer-to-peer Lending and ‘Angel Investors’

A so-called ‘angel investor’ is like a dragon from the Dragons’ Den. They’ll fund part of your business venture in return for a percentage of the profits. You’ll often receive business mentorship as part of the deal, too.

There are lots of angel investor platforms available. Try to meet with (or, these days, video-call) potential investors before signing anything. Always read the small print and make sure you speak to several possible investors before choosing your partner.

Peer-to-peer (P2P) lending is a bit more anonymous. You don’t get the business mentorship but you can access a larger fund.

Investors pay into a P2P fund in return for a percentage on their money. The P2P platform takes a percentage, too. Think of it like a loan – but without the need to satisfy high lending requirements of a high street bank.

Crowdfunding

We’ve all seen the success of Kickstarter and Crowdfunder. But how do they work?

You create an online pitch for anyone to see. This includes details about the products you want to develop, what it does, and what the crowdfunded money pays for. You can entice investors by giving them something in return for their cash. For example, they can buy the product early and at a reduced price, or you can offer them a listing on a sponsors page – anything you think will entice investors.

You have to set a target. If you fail to reach the funding target, you won’t get any of the money.

If you do reach your funding target, on the other hand, you will get your money. However, it doesn’t stop there. You’ll be held accountable for the cash and will have to prove you’ve done what you said you’d do with the cash.

Local Authority Funding

Check your local council’s business pages to see what assistance it offers. You might be surprised!

Many local authorities offer funding or mentorship programmes for new business owners. These schemes are often more prevalent in deprived areas, to encourage new companies to set up in that region.

Regionally, Wales and Scotland tend to have more local funding options for new businesses than England and Northern Ireland.

The funding available could be anything from a one-off grant to ongoing business support in the form of a rent-free office or shop space. Many grants need to be matched – so if you need £1,000, you’ll need to put £500 up yourself and ask for a further £500 in the grant.

In a post-lockdown world, you may also find new grants and schemes popping up as local authorities try to stimulate the economy and reduce regional unemployment. So, if you have no luck right now, keep an eye on it!

Social Enterprise Funding

 

If you want your new business to be a social enterprise, this opens you up to many more funding opportunities.

A social enterprise puts surplus profits back into the business to aid the community. You can still earn a profit and wage, but your overall work needs to have a social or environmental mission that benefits your local community and surrounding areas.

Running a business like this is similar to any other business model. However, instead of sharing profits in the form of dividends to shareholders, you put that money back into your business efforts to maximise your impact on the community.

Social enterprises qualify for all sorts of grants, including those offered by the National Lottery Community Fund.

Loans are available as a funding option, often with a percentage grant. This means you won’t have to pay back everything that’s borrowed, only the loan element. For example, the First Steps Enterprise Fund offers loans up to £30,000 – with 90% of that as a loan and 10% a grant.

Try The Grants Hub to find social enterprise grants and loans for your business type.

Training Grants

If you need to achieve a qualification before you can open your business, you may receive training funding to help.

For example, people on Universal Credit may apply to have some or all fees paid for, if they enrol on a short professional development course. The course needs to be an essential item – for example, your Gas Safe certification if you want to start a boiler engineer business. It could also include things like health and safety training for mobile beauty therapists, licence courses for security staff, or a PTTLS adult teaching qualification for tutors and workshop leaders.

The National Careers Service has some funding opportunities for courses, too.

If you’re on a low income, it’s also worth looking at your local adult education centres and courses. They’ll often offer free or discounted places to people on benefits or who can prove a low income.

Look at charities centred around your industry of choice, too. Screenskills, for example, offers bursaries and training opportunities for all kinds of people wanting to work behind the scenes in television and film.

Apprenticeship Funding

Do you want to set up a business with staff? If you’re not planning to go it solo as a freelancer or contractor, staffing costs will make up a huge overhead as you set up your company.

Apprenticeships offer a way to staff your company while training the new generation. New businesses have to fund 5% of apprenticeship costs, with the rest covered by a Government scheme.

You’ll need to follow the rules about working hours, and time off for study and exams, and assist with mentoring your apprentice.

Your apprentices could become full-time staff once they pass their course a few years down the line, too!

More Business Ideas and Tips

Feeling inspired now you know you’ve got lots of ways to fund your business idea? Check out these other business and freelance tips, too!