Introduction
Are you self-employed and considering claiming tax credits? This comprehensive guide will walk you through the essential steps you need to take to successfully navigate the claiming process. With specific insights for foster carers and tips on calculating your income, you’ll be well-equipped to understand your rights and responsibilities. If you encounter any challenges along the way, Contend’s highly trained AI legal experts are here to help. They provide the easiest legal assistance in the UK, ensuring you receive the guidance you need to resolve your legal issues confidently.
If you’re self-employed and looking to claim tax credits, you’re in the right place. The process is similar to that of other applicants, but there are some specific details to keep in mind. Here’s what you need to know to make your claim successfully.
Special Considerations for Foster Carers
If you’re a foster carer, you can typically claim working tax credits, provided you meet certain conditions. You can claim if:
- Your business expenses do not exceed your fostering allowance (meaning you don’t end up with a loss).
- You meet the other eligibility criteria for working tax credits.
When you fill out your application, make sure to include your fostering allowance as part of your income. When asked about your working hours, report the time you spend caring for your foster child. If you have another job, include that income and the hours you work there too.
However, keep in mind that if you receive a fostering allowance for a child, you cannot claim child tax credits for that child.
Calculating Your Income
When applying for tax credits, you’ll need to provide your income for the previous tax year (the year ending on April 5). To find this, check your self-assessment tax return for your ‘taxable profits’ and then subtract the following:
- Any trading losses carried over from the previous year.
- Personal pension contributions made during the last year.
- Donations made under Gift Aid.
If you haven’t completed your self-assessment for the previous year yet, make an educated guess about your income. Try to be as accurate as possible—if you estimate a bit high, HMRC will adjust and pay you any tax credits owed at the end of the year. For more guidance, you can visit the GOV.UK guide on working out income for self-employed individuals.
What If Your Income Is Too High?
Even if your income is slightly above the limit for tax credits, it’s still a good idea to apply. You may not receive any credits immediately, but if your income changes later in the year and you become eligible, your application can be backdated to the time you first applied. This is known as a “protective claim,” and the application process is the same.
Estimating Your Work Hours
You’ll also need to report how many hours you typically work each week. This includes not only the time spent directly working with clients but also any related activities such as:
- Preparing quotes
- Traveling for work
- Visiting suppliers
- Cleaning your workspace or equipment
If you’ve just started your self-employment journey, make a reasonable estimate of how many hours you expect to work in these areas each week.
What Happens After You Apply?
Once you submit your application, HMRC may reach out for more information about your business. To demonstrate that your self-employment is legitimate and that you plan to make a profit, it’s wise to keep a business plan and maintain records such as:
- Invoices and receipts
- Cash books
- Sales and purchase ledgers
- Payroll records
- Bank statements
Sometimes, HMRC may consider your activity a hobby rather than a business. To avoid this, you can check what qualifies as self-employment on the GOV.UK website.
If you encounter challenges or if HMRC questions the legitimacy of your self-employment, don’t hesitate to reach out to Contend’s legal expert chat for assistance. Their highly trained AI legal experts will work with you to provide guidance and help you understand and resolve your legal problems. You have the right to contest any decisions you believe are unfair.
Final Thoughts
Claiming tax credits as a self-employed individual may seem complicated, but with the right information and preparation, you can navigate the process. Make sure to gather all necessary documents, provide accurate information, and don’t hesitate to seek help if you need it. Good luck!
For more info, check out some of our related articles:
