I read a post at http://www.moneyhospital.co.uk/blog/post/could-you-actually-live-off-60-a-week-20183 regarding living off Job Seekers Allowance (the DOLE) which is apparently £60.50 a week now.
The user comments brought back memories and made me think some people would be better off starting their own business (self employed) rather than being registered as unemployed and claiming job seekers allowance (JSA) or income support (you claim income support if you haven’t paid enough national insurance contributions).
When I started my first business selling adult lingerie and sex toys I’d been out of University for about three years after leaving on medical grounds (chronic back pain, had a back operation earlier this year to fuse discs). I’d been unable to finish my degree in genetics or work due to disability and had been claiming income support on medical grounds (I wasn’t classed as unemployed, I was too disabled to work).
When I decided to start a business I believed you had to register a LTD company or something (I even got the forms from Companies House and everything) and jump through major hoops to start a business (quite funny in hindsight). I couldn’t have been more wrong, I registered as self employed (sent a form in if I recall correctly) and that was pretty much it, I was in business!
At first I thought to be able to survive while running a business I’d HAVE to make a profit, a case of if I didn’t make X £s a week, we wouldn’t eat (had a wife and three sons to support). I was so wrong, in my first tax year (~6 months trading) I lost about £500 (I did accounts from April to April to make accounting simple), that first 6 months was pretty much setting up the business (learning/building a website), but because I was working full time we could claim working tax credits and child tax credits. I forget exactly how much it was, but I’m reasonably sure it was at least as much as income support (I think it was more) and we could still claim housing benefit, council tax benefit etc…
Claiming working tax credits is pretty much a helping hand back into work, you can start on a low wage (no wage) and still get help from the government, over time the idea is you make more money and so need less help (that’s how it worked for us anyway).
I didn’t start a business to claim working tax credits, I hated being disabled and unable to work and the ONLY way for me to provide for my family was to run a business from home/online (I couldn’t sit in a chair for more than 15 minutes). I also hated having to go for incapacity benefit medical assessments to be able to claim income support on medical grounds, (basically incapacity benefits when you haven’t paid enough NI contributions) I used to go in a T-shirt and jeans (big mistake**) and one of the medical assessment doctors said I could work! It took 18 months to go through the appeals procedure and get full income support on medical grounds reinstated, (we had to live off reduced income support) they owed us almost £5,000 in unpaid income support by then!
** If you go to see one of the assessment doctors (any doctor for that matter), PLEASE wear a shirt if you are a man. My wife persuaded me to wear a shirt (plain dark blue shirt with black jeans and soft boots, nothing special) to the appeals medical assessment, I thought she was nuts thinking it would matter (as always I was wrong). I entered the room, the doctor asked me to touch my toes, as always I could barely get passed me knees (I have super tight ham strings). He pulled up the back of my shirt, pushed a few times on the soft muscle tissue of my back (which had never been the issue) and told me I could go! Normally I’d have stripped to my boxer shorts and socks for that type of medical examination and been examined and questioned thoroughly. I was once again disabled according to the DSS doctors!!!! When I’d go to a GP after this I’d wear a shirt and it would be so much easier to get stronger pain medications, I was on 360mgs of di-hydrocodeine a day before my back operation (maximum recommended dose is 240mgs a day).
My First Online Business
I started selling adult lingerie and adult toys because of the markup (amazing markup), I considered selling pellet guns/bb guns before that (less markup). Year 2 (next April to April) I’d sold over £80,000 worth of stock, (I personally took £25K from the business) had to register for VAT and have never looked back. I no longer sell products, I learnt search engine optimization (SEO) and it interested me (not as much as genetics, but I need something that interests me, not just work for money).
I switched my focus from selling products to offering SEO services and have been doing well ever since. To keep sharp I also do affiliate marketing (kind of a money making hobby) and make over $3,500 (~£2,000) a month that way pure profits (£24K a year in my spare time having fun with websites like the one you are reading now 
). I make a $1,000 a month from the AdSense ads you see on this page (ads on multiple sites, not just this one).
Anyway, point is I went into business, self employed and lost money in my first financial year, but because I was working full time I could claim working tax credits and child tax credits. It’s not difficult to setup a business online without having much money, when I sold adult products my biggest expense was a computer (£500), I pretty much broke even on the products I sold first 6 months (I was using AdWords and Overture for traffic in the couple of months I actually had a working site that first 6 months, so didn’t really make much). Year two, which I consider the first year really I’d learnt SEO and was seeing up to 8,000 unique visitors a day for free from search engines (Google loved my site until it banned it for link spamming, yes I made mistakes).
Setup a Business and Can Claim Working Tax Credits and Child Tax Credits
A person could in theory setup a business to make money from affiliate marketing and ad revenue (AdSense) from articles they write.
This article you are reading now will make me a little bit of money each month. People read the article and a small percentage will click the AdSense ads and I get a share of the revenue from Google AdSense (using Google AdSense is free).
This website was very easy and cheap to setup.
A domain can be registered for under $10 a year (Godaddy is good for non .co.uk domains, I use Fasthosts for .co.uk).
I use two dedicated server for my sites (have about 100 domains), costs about $160 a month, but you could pay for cheap hosting ($50 a year or less per domain, not checked prices for ages).
This website uses a CMS (content management system) called WordPress which is free and aimed at bloggers, minor changes (basically remove the monthly archives) and you have a general CMS rather than a blogging platform.
If you want AdSense ads (signup for AdSense, it’s free) like you see on this site I sell them for £10 each at Google AdSense Templates , I also have one Free AdSense ready theme and plan to add more free ones, so if you want to keep it super cheap, you can.
Total cost under $100 a year per domain (you only need one domain). You can in theory start for free by using a free WordPress blog at wordpress.org or Blogspot blog at blogger.com (both completely free, so no expenses at all to start).
Then you write your ass off and learn about search engine optimization (see some of my other sites below) so you can get free traffic to your site (takes a long time with a new site).
WordPress SEO Tutorial
General SEO Tutorial
Improve Search Engine Rankings
Make Money Online Guide
Don’t expect to make a lot of money quickly doing this, the idea is to have a business so you don’t have to claim job seekers allowance/income support and can then build up the money you make long term (or eventually find a suitable job). It’s got to look better on a CV to have a period of self employment than a period of unemployment.
Websites not your thing, try something else. Window cleaning, car washing, gardening, dog walking….. the list is endless, choose something cheap to setup and if it picks up consider investing then. Since you don’t need to make a profit to be self employed and be able to claim working tax credits and child tax credits it doesn’t matter if you make a lot of money, all that matters is you work full time.
And you never know you might find a great niche like I did and make a great living out of it. We bought a house 3 1/2 years ago, at the rate we are going it will be paid off in full in another 2 years: would be less, but we’ve been renovating which requires cash.
I’ll try to find the time to research some money details for this article, exact amounts people get on income support, working tax credits etc… under various scenarios so it makes sense: currently an idea at this stage, not a full plan for those struggling to survive on unemployment benefits.
Would love to hear others thoughts on this.
David Law
15 responses to Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
Dave, I printed your article as its long and print worthy.
1) In the US you do not need anything to set up a business, just fill out the right tax forms. I do not understand the working tax credit as I am not a UK citizen, I am a US citizen, I work and pay taxes and can take deductions based on business expense on my schedule c, really that is it. If you have a family of course you get a higher deductible. But there is no ‘on the dole’ in the states except 8 months of unemployment, then that is the end of medical and pay. It kind of sticks for many people and in the USA there are some real problems for many families. But your solution of working for yourself is great, everyone has a niche, it could be dog walking or baking apple pies, but everyone has something to offer this world.
2) I noticed that you use .html on a few of your WP sites? Does .html rank better, there is a debate, but in your humble opinion? If you want a tip about this you know how to contact me, I made a small breakthrough in that regard
3) Your story is inspirational. I work from home as you do and for me to be with my family is priceless, even I do not make a lot. I like Adsense and you are right after years of work you can make money, but do not think you will set up a site about ‘mobile phones’ or ‘credit cards’ and start making money online the next month. Working at home is great,but you have to work, really work, not like working for a company where most people screw off a lot.
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
Hey Dave,
I’m not gonna lie…I’m hanging on your next post. I’ve been an SEO/Web Dev for about 9 years but just finally applied my skills to affiliate marketing. Reading your monthly updates keeps me motivated to work long days getting an empire of sites built.
Thanks for your blog!
Mike
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
We too decided, when we couldn’t find work, to become self employed and go down the WTC/CTC route rather than deal with the DWP and job seekers allowance. Having said that, what I’ve also noticed is that, though the business was profitable from the beginning, it has taken far longer than I anticipated to earn enough profit to get away from reliance on any benefits. It could just be due to the recesssion, but in the back of my mind, sometimes I wonder whether having income guarantees like WTC, CTC, housing benefit, council tax benefit and the like make people operating marginal businesses (my test isn’t profit versus loss but rather profit versus a big enough profit not to need to rely on the government) unnecessarily risk averse.
The other thing – and of course, now I will never know – I wonder is, if not for this option,would we have persisted with trying to get jobs working for other people? I mention this because, while it’s nice being your own boss and for sure, access to WTC has kept us afloat during these first lean years, has also meant that we haven’t earned as much in the last few years as we would have if we had eventually been successful getting jobs working for someone else.
Of course, there is the other side of that coin. If we hadn’t ever got jobs (entirely likely, given factors like age and the recession) we would have still been on JSA with no potential to increase our income.
In some ways, that’s the best thing about being in your own business. As long as it is profitable, so while it may not make you much, only costs you in terms of opportunity cost (of what you could get working for others) rather than real hard cash to support the business, there is always the potential that you can go on growing that business. The sky really is the limit. And that’s something you can’t really say about being unemployed or working for someone else.
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
Hi Guys,
Made redundant in April and have not looked back really, also internet marketing and stuff.
Got a good payout but knew it would’nt last so kitted myself out with a pc all mod cons you know. Did’nt have a clue but went for it.
Anyway cut a long story short, i now work from home as they all say. I dont have millions in the bank but who cares I work for a couple of hours on my business and then the day is mine.
They were right it is possible even for a numpty, just check on my sites and investigate new stuff and thats it, move with the times and keep up with new products to stay ahead.
Its all step by step stuff and some of these guys will almost hold your hand through this stuff. 2 guys I swear by are Jim Cockrum and Tellman Knudson, they are the real deal and I just read their blogs and believe in all their stuff. It worked for me and it was easy.
Only thing now is how to legally dispose of the wife and i’m homefree.
Cheers Steve.
http://spyker68.cbpirateblog.com
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
does working at home (ie using your home as a place of business as well as a place of residence) affect your entitlement to housing benefit in any way? i haven’t been able to find much info about this.
re: my question above, from what i can find out, it seems that housing benefit is only affected if part of the home is being used for business exclusively (like a separate office).
Great article- I’ve been on income support forever and just assumed that all state support would be taken away if I ever became self-employed. The only option ever discussed at work-focused interviews ( every 6 months at the Jobcentre) was paid employment, which in my case is not a realistic option given lack of transport and childcare, crap CV, recession etc. Last time at the Jobcentre I wanted to discuss self-employment but was fobbed off with ‘there’s really no point talking about it unless you’re planning to start work immediately’. Duh, when the whole point of asking is so I know in advance what to expect to happen to my benefits, and thus whether the whole plan is feasible! I think a lot of lone parents would set up a home-based business tomorrow if they knew it was likely to be feasible. As you say, we all have something we could do. Always easy to blame the government, but if the DWP made it easier to get information specifically on setting up a business when on JSA/IS etc, and if the Jobcentre staff were trained to encourage and support this aspiration instead of pouring cold water on it, there might be fewer of us feckless spongers around and more successful entrepreneurs! Just a thought
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
This is a really useful article, thank you. I’ve just signed off JSA and in process of trying to claim WTC and HB as a self-employed musician / music teacher, took me months to realise these options, they seem too good to be true. In the process of setting up my own music websites which still seems daunting but your advice is really helpful.
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
Great source of information!!! I am in a similar situation, just being made redundant from my main job, but run my own shop online and textile business. But I am not entitle to any JSA, due to still be self employed, or Tax credit, as my last year earnings were more than £13.000. Funny how this system doesn’t work at all!! That means I won’t have enough money to pay house, bills etc…but earn more than enough to claim any help!! I reminds positive, and lets hope my business takes off.
I will keep reading your great site.
Regards
Marga
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
Good luck with your online business, check out some of my other sites for free SEO information to increase your search engine traffic, in particular these:
http://www.seo-gold.com/seo-tutorial
http://www.google-adsense-templates.co.uk/seo-tutorial-for-wordpress
http://www.seo-consultant-services.co.uk/
Had a quick look at the Working Tax Credits and Child Tax Credits rules at http://www.hmrc.gov.uk/TAXCREDITS/payments-entitlement/entitlement/how-worked-out.htm and the current numbers are:
Looks like there’s a lot of scope for claiming even for those earning up to £50K. I think the Conservatives plan to change the rules if they win the elections, so less families can claim.
There’s a calculator at http://www.workingfamilies.org.uk/asp/calculator/
I ran an example through the calculator (couple, one child, no to most questions) earning £13,000 taxable income this/last year and got:
£90.88 a week.
Couple with no children on £13K and it’s £37.57 a week.
Single with no children on £13K and it’s £1.89 a week. Not much, but does entitle a person to free prescriptions etc…
If you are earning around £13K it might still be worthwhile claiming tax credits (no harm trying), especially if you have a partner and/or children (I think I saw kids as old as 20 count?).
The above tax credits calculator is very good, it’s mostly yes/no questions and you can change your answers at the end as many times as you like to see what different circumstances would result in.
David
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
A disability element can bump the WTC up even more. People shouldn’t be too proud on their form to put that they have a disability. It works for them and not against them.Single working men can also claim WTC.
I used to work in the job centre a few years ago
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
I’m thinking of doing this with my blog, but does HMRC need proof that you are working more than 30 hours a week, so you can get the full entitlement?
How would they know how long it takes you to write a few posts, and how could you prove it?
I have just left my job, was working 20hrs per week. As a single mum of two kids aged 17 and 12 – can i still get child tax credit without having to reapply for jobseekers allowance? i do find it easier to sort my own life out without running in for weekly meetings and being offered ridiculous jobs and having to supply proof that i applied for them. I know i obviously cannot continue to get working tax credit but are they going to stop the child tax credit?
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
The working tax credit and child tax credits you’ve been getting I think are different to the working and child tax credits you’d get if you went self-employed (assuming that’s your plan).
If you’ve already gone self-employed you wouldn’t apply for JSA, I would assume you’d contact the agency dealing with tax credits and have them send new claim forms for working tax credit etc… based on self-employment. I understand the system has changed since I used it years ago, they’ve created various subsets for claiming tax credits, when I claimed it there was tax credits and disability tax credits which covered everyone (self employed or working for an employer).
David
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
This is a really inspiring string of comments; I was made redundant last week aged 42 and rather than run the DWP gauntlet I have, after reading this, decided to go down the self employed route and claim WTC.
I have a small business idea which if I have time at home to grow and devlope (whilst recieving working families tax credit) has the potentail to grow endlessly.
It all sounds too good to be true, claining WTC for staying at home developing a business – especially if I claim for 30hrs per week. Plus I have two small kids.
The down side is that I’ve just lost an extremely well paid job so Im gonna miss the income but the dividends are good, i.e. it allows me a chance to make something of myself, developing MY idea, plus having more time at home with the family – The sky is the limit.
Thanks agian for the inspiration.
Claiming Working Tax Credit Instead of Job Seekers Allowance/Income Support
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