The printed paper version of PRIME’s brief guide to Working Tax Credit for the 2007 to 2008 financial year is now available.
You can still download the guide from here as a PDF. We can send a paper copy to PRIME business club members, just email us your details and we’ll post you a free copy.
We are also distributing the 20-page booklet free to libraries, enterprise agencies and advice shops – so if you are one of those just email us your requirement.
Working Tax Credit is a kind of reverse income tax that you should get if your household income falls below a certain level. PRIME’s guide is written especially for self-employed people over the age of 50. It explains the scheme in only 20 pages and contains worked examples showing how much self-employed people in different circumstances would get.
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I am now looking at how best to apply for Working Tax Credit having applied on the advice of JCP business start up officer and failed to achieve it as I was not yet trading or earning. My JCP officer also told me to dispense with constructing a formal business Plan with the foreword outlining my idea and competition etc. I have now that I am no longer signing on begun one. The problem is no finance to go forward so I may be back to signing on soon. If I cannot fulfill all criteria for claiming working tax credit while I source finance/grant to get me leap-frogged into producing/trading. The booklet will help to clarify my lack of knowledge as I need income to go forward
If you are working less than 16 hours a week (and it’s 30 hours if you are aged under 50) they won’t give you working tax credit. So it’s just for those working and on low incomes, as you are likely to be as you try and get your new business going.
However by the same token if you are working less than 16 hours a week you should still be able to get Jobseekers Allowance. The best way to do this is to go onto a “test trading” scheme if this is available under New Deal in your area. But even if test trading isn’t available you can legally work for under 16 hours a week and still get benefit as long as you declare it. There’s not much point in this long term as they take all but a few pounds of your earnings, but if you are just trying a new idea out it means you don’t have to sign off and close your claim.
The rules for those on Incapacity Benefits are more complex. Starting to work at anything can close your claim, so it’s best to go on an official Jobcentre-approved test trading scheme if you can.
This article answers some of my questions regarding moving over from Jobseekers to Self-Employed and Working Tax credit. Could you confirm for me that it is ok to stay on Jobseekers while my business is in its infancy and I am not earning or working more than 16 hours? Also does my marketing, networking and advertising for clients/work count as looking for employment under the terms of claiming jobseekers allowance?
Many Thanks
Lynda Colley
Out Of Office
Virtual Administration Solutions
The basic idea of Jobseekers Allowance is that you should be available for work (especially interviews about work provided via the Jobcentre). This is where the 16 hours comes from. If your part-time work – whether it’s self-employment or something else, comes to under 16 hours then you are still available for such work the rest of the time. So you can still get Jobseekers Allowance as long as you keep the Jobcentre informed of what’s going on.
The issue of any money you make while working is slightly different. It is less important under the system than your availability for work. So you can make money from your part-time work as long as you declare it and you can still receive Jobseekers Allowance.
However, the catch is your JSA amount will be reduced pretty well in step with how much you declare, so if your income is much or lasts for some time you may as well close your claim. The point of the system here is to enable you to avoid having to stop and start claiming if the money you receive is episodic, which it may well be with a new venture.
There is an additional complication with self-employment, as not all Jobcentre staff understand it. Your true income from self-employment is your net profit, in other words the revenue you receive minus business expenses (both your fixed and variable costs). This is hard to calculate in any meaningful way for a short period. The danger is Jobcentre might just treat your crude revenue as your income, and deduct this from your JSA payment, which incorrect.
To avoid such problems it is very much in your interests to deal with someone at Jobcentre who does understand self-employment, and to go on any “Flexible New Deal” schemes specifically set up to support testing out self-employment if you are lucky enough to have such a thing available in your area.
Re the more intangible things you can spend a great deal of time on when starting a business, such as the marketing, networking and advertising you mention, I very much doubt it would count as “looking for employment” to the great majority of Jobcentre advisers. If you explain it to them they may regard it as the exact opposite – you not being available for work – i.e that great job offer for shelf-stacking at B&Q!
On the other hand being intangible and hard to quantify it might turn out to add up to very little time at all.
Really it is down to who get at your Jobcentre. If you get a good adviser who you trust and who understands self-employment the best policy is probably to be thoroughly honest – and badger them for any relevant training or New Deal programme you can get. After all, you are trying to work your way off welfare, which is doing them and the taxpayer a favour and exactly what they should encourage.
If on the other hand you get someone who only barely understands self-employment I’d keep things simple and avoid troubling them with notional, intangible things unless specifically asked. The key thing is you can only get Jobseekers Allowance if you are doing other things for less than 16 hours a week, unless it’s one of their own schemes.
Here’s a summary of the rules they work to.
What about tax credits for 2009 to 2010
The basic structure of scheme is unchanged, but the detailed numbers have changed – mainly in line with inflation. Here’s a table with the rates for the tax year 2009-2010.
Elements of WTC Weekly amount, with maxmum annual amount in brackets
Basic element £36.26 (£1,890 pa)
Couple or partner element £35.70 (£1,860)
Lone parent element £35.70 (£1,860)
30-hour element £14.91 (£775)
50-plus element for working 30 or more hours £37.17 (£1,935)
50-plus element for working 16 to 29 hours £24.99 (£1,300)
Disabled worker element £48.58 (£2,530)
Severe disability element £20.65 (£1,075)
Childcare element, weekly:
Maximum eligible cost for one child £175 (maximum payable £140)
Maximum eligible cost for two or more children £300 (maximum payable £240)
Percentage of costs covered 80%
Hi there, I am about to embark on a new business venture and as others I am currently on JSA. I am over 50. Can I claim JSA and working tax credits until the business starts generating an income. Thanks
No, I doubt it. Normally you can’t get JSA and Working Tax Credit at the same time.
The one exception might be if you are on a Jobcentre-approved business training scheme, but even then I expect they’d keep you on JSA or Employment Support Allowance, and not give you WTC.
The standard experience is that Jobcentre Plus closes your JSA claim once you start working regularly for more than 16 hours, but at that point people over 50 become eligible for Working Tax Credit – from HMRC. Occasional work over 16 hours is permitted at their discretion if you tell Jobcentre.
Delays and confusion during the change-over to self-employment sometimes happen, which can amount to a benefit trap putting people off working. That’s why it’s a good idea to clarify now with Jobcentre what the process is and what the current interpretation of the rules are.
Jobcentre is supposed to do you a personalised “better-off” calculation so you can see if working makes financial sense. Though you may have made up your own mind anyway for other reasons, it is worth requesting to get them to say something about exactly when your benefit might end.
Don’t forget housing benefit if you receive it. Though administered by local councils the money comes from the DWP, so Jobcentre should be able to include it in a better-off calculation.