How does universal credit work if I have a limited company?
This is a question we are seeing a lot, given tax credits have ended and the transition for many people, to universal credit, is complete.
Not everyone that has a limited company is a high earner. If you have a lower income, have a fall in income or are unable to work for the moment, you may need to make a claim for universal credit.
In summary, for universal credit, if you are an owner or director of a limited company you may be treated as though you are self-employed and the company income treated as your self-employed income. This is different to the tax system, where earning money through your own limited company is treated very differently to earning money as a self-employed sole trader.
In a guide written by LITRG, exclusively for the Free-work website, we look at this question in more detail under the following headings:
- What is universal credit (UC)?
- Can limited company directors claim UC?
- How are self-employed earnings calculated under UC?
- But won’t any drawn salary also be treated as ‘employment’ earnings?
- Where does payment of corporation tax get recognised?
- Why isn’t the corporation tax position clear?
- Are there any other issues with UC?
- If I’m a limited company director, what is the minimum income floor?
- Is the minimum income floor universally applicable, including to limited company directors?
- Disagree with your award?
- Top three key points about UC – partners, working age, capital limit
- UC as a limited company? It’s not for the faint-hearted...
You can find the guide on the Free-work website.
If you run a property rather than a trading business, there are some differences in treatment for UC purposes. You can read about them on our limited company page in the UC section on our website.
You can find a recent article about the end of tax credits on our website.
