End your tax credits

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If you’re self-employed

You need to work out your income from being self-employed for your ‘award period’ - this is usually from 6 April (in the current tax year) to the time you stop getting tax credits.

This is different from your tax credits renewal letter. You’ll get a guide with your award review to help you work out your income. Read it with your award review letter.

You also need to include details of earnings from any other employment and other income in your ‘award declaration’ (the information you send to HMRC to confirm your income), for example pensions or taxable benefits.

The tax year runs from 6 April to 5 April the following year.

Working out your income

You may be able to use a part-year profit calculator to work out your income for your award period.

You can also use HMRC’s working sheet to work out your daily rate and multiply it by the number of days in your tax credits award period.

You need to know:

  • the dates for the accounting period which ends in the tax year you start claiming Universal Credit - this is usually 6 April to 5 April the following year if you’re self-employed
  • your actual or estimated profit for the accounting period - HMRC may ask how you worked out your estimated profits
  • the number of days in your accounting period - this is usually 365, but it may be different if you’ve recently started or stopped being self-employed, you changed your accounting dates or it’s a leap year

If you do not have a full year’s accounts

You may be able to use a part-year profit calculator to work out your income for your award period.

You can also use HMRC’s working sheet to work out your daily rate and multiply it by the number of days in your tax credits award period.

Example

You claim Universal Credit on 1 December 2015. You need to work out your taxable profit for the period 6 April 2015 to 30 November 2015 (your ‘award period’).

Your accounting period runs from 6 April 2015 to 5 April 2016 (the same as the tax year) which is 366 days.

You work out your estimated taxable profit for your accounting period to be £22,000.

Your daily rate is £60.10 (£22,000 divided by 366 days).

The number of days in your award period is 239 days.

Your taxable profit for your award period is £14,363 (239 days multiplied by £60.10).

If you have more than one business, you need to work out the taxable profit this way for each one. Put the total in your ‘award declaration’.

Other income

You need to include details of other income you’ve received while you were getting tax credits in this tax year, including:

Take the total amount before tax and deduct £300. If this leaves you with a minus figure, enter ‘0’.

Do not include:

  • maintenance payments
  • student grants or loans

Deductions

You can deduct any of the following you made during your award period:

  • payments to a registered personal pension scheme or annuity
  • donations to charity where Gift Aid was applied

If you made a loss, or expect to make one, you can:

  • enter ‘0’ as your self-employed income in your ‘award declaration’
  • deduct it from any other income you (or your partner) have

Once you’ve worked out your income you need to report your income to HMRC on your ‘award declaration’.

View a printable version of the whole guide

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