Freelance care workers, among others, may be able to benefit from the government’s newly created self-employment credit
Apart from child tax credit, working tax credit and pension credit, advisers and clients now have to get to grips with a return-to-work credit, an in-work credit and even a better-off in work credit. Surely, I recently told myself, there could be no more additions to this family of benefits.
Not for the first time, I was wrong. In January 2009 the prime minister announced a “six-month offer” package for unemployed people who have been claiming jobseeker’s allowance (JSA) for over six months. This package was introduced nationally from 6 April 2009 and includes:
- Support for self-employment option.
- Work-focused volunteering option.
- Work-focused training option.
- Recruitment subsidy option.
From 6 April, as part of the support for self-employment option, people moving off JSA to start a business or self-employment have been eligible to claim a self-employment credit (SEC). This could have some interesting implications for social care services, and the extension of direct payments in particular.
The self-employment credit, which will be administered by Jobcentre Plus, will be a weekly payment. It will be paid at the rate of £50 per week for a period of up to 16 weeks.
In order for a person to gain the new self-employment credit, they will need to:
- Stop claiming JSA.
- Move into self-employed work of 16 hours per week or more.
- Provide information to their Jobcentre Plus personal adviser on the self employed work/business they are undertaking.
- Show that the work will last at least five weeks.
- Register with Revenue and Customs as self-employed.
- Not be claiming any other in-work credit payments, ie, the return to work credit or the in-work credit.
However, the claimant will be able to claim the more long-standing tax credits, such as child tax credit (if they have children and earn less than about £58,000 a year) and working tax credit (if their income from self-employment is low enough). Not only that, but the self-employment credit won’t count as income when those benefits are calculated, which does make it a useful source of additional income.
It doesn’t count as income when housing and council tax benefit are calculated either.
Self-employment credit will also be disregarded for the purposes of income tax and national insurance contributions (except class 2 contributions).
Although this is hardly the opportune time for many people to be launching themselves into self-employment, with the failure rate of new businesses at record levels, there are some interesting possibilities in the social care field.
The increasing use of direct payments, for example, means that there will be many more opportunities for “freelance” care workers. Some of these have self-employment status and therefore are able to access this credit if they are coming off jobseekers allowance, as well as possibly getting working tax credit as well. If they are employees of the disabled person however, WTC is still a possibility but the SEC would not be.
Don’t forget too that child-minders and foster carers also have self-employed status when they are working. This credit could form a useful bridge in those awkward few months between coming off JSA (which many lone parents are now in receipt of) and getting a regular income from their work.
Gary Vaux is head of money advice at Hertfordshire Council. Any queries for him should be directed to email@example.com
This article is published in the 27 August 2009 edition of Community Care magazine under the headline Help for those going it alone in the personalisation era