Self-employment income - work it out for your tax credits claim

When you complete your tax credits claim form you'll need to give details of your income for the last tax year. A tax year runs from 6 April one year to 5 April the next. If you're self-employed, this is the profit on your tax return. You'll need to estimate your profit if you don’t know the actual amount yet.

On this page:

Working out your income

This is a three-step process:

  • Step 1: look at how much profit you made
  • Step 2: decide what to take off
  • Step 3: then what did you have left?

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Step 1: how much profit you made

First work out what profit you made. If you’ve filled in your tax return for the last tax year, tell the Tax Credit Office the profit you included on the return. If you had more than one business, add up all of the separate business profits.

If you haven't filled in your tax return, you'll need to estimate your profit for the last tax year. A profit is the difference between all the money you made from doing work or selling goods and the cost of doing that business.

You can get help in working out your profit by calling the Self Assessment Helpline.

Contact details for the Self Assessment Helpline

Profit from outside the UK

You must include any profit you made from working outside the UK. You need to enter the amount in British pounds, not the foreign currency. To work this out, use the average exchange rate for the year your income relates to. So, if your income relates to 6 April 2013 to 5 April 2014, use the average exchange rate for the year ended 31 March 2014.

Go to an exchange rate calculator

What else to include

If your business received other income or profits, for example rental income from a flat above a shop, make sure it's included in your profit. Don't show it as ‘other income’ on your tax credits claim form or Annual Declaration form as well.

If you use averaging - for example if you're a farmer or market gardener

You need to adjust your profit to take out the averaging. To do this, look at what you have entered in one of the following boxes on your tax return:

  • box 71 - on the Self-employment (full) pages
  • box 10 - on the Partnership (short or full) pages

If the figure you entered:

  • increased your profit, take this amount off
  • reduced your profit, add this amount back in

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Step 2: what to take off

When you've worked out the profit, take off:

  • the gross cost of any pension payments you made into a scheme registered with HM Revenue & Customs
  • any trading losses from the same business you brought forward from a previous year
  • the gross amount of any Gift Aid payments

Download a help sheet on tax credits relief for Gift Aid donations, pension contributions and trading losses (PDF 970K)

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Step 3: what did you have left?

Take the Step 2 total from the Step 1 total to show your Income from self-employment. Put this on your tax credits claim form or Annual Declaration form in the section on income.

If you made a loss in the last tax year, enter 0 in the box.

You can take a business loss from any other income you got during the year - or from other income you and your partner had if you're making a joint claim. Any remaining loss can be carried forward to future years’ profits of the same business.

Download a working sheet to calculate relief and losses (PDF 970K)

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If you've just become self-employed

You might have only just started working for yourself and had no income from self-employment in the last tax year. If so, leave the 'income from self-employment' box blank.

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If you don’t know your exact income

You might not have all the information you need to work out your income for the last tax year. If so, use what you do have to make an estimate.

For example, if the money you have coming in is roughly the same throughout the year, you can use that amount and multiply it by:

  • 52 if you are paid weekly
  • 12 if you are paid monthly
  • 13 if you are paid every four weeks.

If your estimate is too low, the Tax Credit Office may pay you too much and you'll have to pay it back.

If you have estimated your income, put an 'x' in the estimated income box of your tax credits claim form or Annual Declaration form. You'll need to provide details of your actual income by 31 January or the deadline given to you when you're asked to renew your tax credits.

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If your income changes

You need to tell the Tax Credit Office straight away if you expect to have more or less money coming in this year. This will help make sure you don't get too much or too little in the way of tax credits.

Find out what to do when your income changes

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More useful links

Which state benefits to report when making a tax credits claim

Other income - work it out for your tax credits claim

Income from employment - work it out for your tax credits claim

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