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 - on your own or in a partnership - your income is the profit that you made.

On this page:

Working out your income
Step 1: how much profit you made
Step 2: what to take off
Step 3: what did you have left?
If you've just become self-employed
If you don't know your exact income
If your income changes
More useful links

Working out your income

This is a three-step process:

Step 1: how much profit you made
Step 2: what to take off
Step 3: what did you have left?

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 on Tel 0845 900 0444. It's open from 8.00 am to 8.00 pm every day, except Christmas Day, Boxing Day, New Year's Day and Easter Sunday.

Find out how to set up a simple profit and loss account on the Businesslink website

What else to include

If your business received other income or profits, for example rental income from a flat above a shop, add this to your profit: don't show it as ‘other income’ on your tax credits claim form or Annual Declaration form.

Also include any amount you deducted for averaging - perhaps because you're a farmer or market gardener and your profits fluctuate.

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
any adjustments you made for averaging - perhaps because you're a farmer or market gardener and your profits fluctuate. If the adjustment:
- increases your profit - deduct this amount from your total profits
- reduces your profit - add this amount to your total profits

Download our help sheet on tax credits relief for Gift Aid donations, pension contributions and trading losses (PDF 250K)

Step 3: what did you have left?

Take the Step 2 total from the Step 1 total to show your Income from self-employment and 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 that you and your partner or spouse 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 250K)

If you've just become self-employed

If you've only just started working for yourself and had no income from self-employment in the last tax year, leave the ‘income from self-employment’ box blank.

If you don’t know your exact income

If you do not have all the information you need to work out your annual income for the last tax year, then 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.

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, so they can 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