Benefits and funding for the newly self-employed

Reading Time: 11 minutes

Article updated 11th March 2025

Did you know there’s support for the newly self-employed? Even at this difficult time, there are still many resources of financial and business support you can access.

You might be stuck in a dead-end office job and desperate to get away from the nine-to-five. Or, you might be in an industry where people are losing their jobs at a rapid pace and want to set up a business to have something to do on the side and expand if you lose your main job. Some people want to be self-employed because they prefer the flexibility of the hours and control of the work, too. However, setting up can require funding – especially as most businesses don’t turn a profit in their first few months (or even years). The good news is that there is help out there.

So, what help is available for the newly self-employed?

Trading Allowance

There’s a lot to get through, so let’s get started!

Trading Allowance

Currently, the Trading Allowance means you can earn £1000 gross before you need to register with HMRC and declare your income. But on 11th March 2025, it was revealed that this allowance is set to increase to £3000 in the 2027/8 tax year.

If you need to spend money to start up your business, like buying materials or products for resale, it is often better to register with HMRC anyway. That’s because you can’t offset expenses from the Trading Allowance – it’s your gross earnings, not less expenses. So if you think your costs will be significant, registering as a sole trader means you can offset some of your business expenses against profit to reduce your tax bill.

Universal Credit and Self Employment

Universal Credit is a flexible benefit. You don’t have to be out of work to access it. When you’re self-employed, you’ll submit a monthly assessment of your income and expenses.

When your net profit is below a certain amount (depending on your circumstances), you’ll receive some or all your Universal Credit payment. The months you earn more, you’ll receive less or no Universal Credit.

This means you can continue to be a UC recipient until your business returns a solid income every month. Unlike Job Seeker’s Allowance, which stops as soon as you find work, UC is an ongoing safety net.

You will need to prove that you are ‘gainfully self employed’. This means that:

1. Your job is your only or main income
2. You have regular work
3. You can show business activity, such as client invoices

There is something called the Minimum Income Floor. This varies from person to person, and is based upon what someone on PAYE in a similar role to yours would earn at National Minimum Wage. If you earn over this amount, your Universal Credit is worked out based on what you’ve earned over this floor (so deductions are made from your earnings to the level of the MIF). If you don’t meet the MIF, your Universal Credit deductions are based on what the MIF would be. The MIF only applies if you are not in a start-up period (see below) or you are gainfully self employed. If you are not gainfully self employed (for example, you have a main PAYE job and a small self-employed job on the side), the MIF won’t apply.

If you’re just starting out, you have one year during the launch of your business to get Universal Credit support without a MIF applied. You don’t have to look for other work, though you will meet with your work coach regularly. Your Universal Credit is based on your monthly income – and losses (such as a month where your expenses outweigh your income) are rolled to the following month. You will report your monthly income and expenses, so bear in mind that your income could reduce how much UC you’ll get that month.

Universal Credit eligibility

There are some limits to accessing UC.

You must:

1. Have less than £16,000 in capital or assets
2. Not own a second property
3. Apply jointly with your partner if you live together.

This means if your partner earns above a certain amount, you won’t be eligible for Universal Credit. You don’t have to be married – if you live with your partner, their income is taken into account.

Universal Credit, Self Employment, and Disability

Self employed people who claim Universal Credit but have a mental or physical disability which affects their ability to work full-time will be able to apply for a Work Capability Assessment. You will be assessed to decide if your health impacts your self employment opportunities, and could be placed in one of two groups for extra financial support if it is deemed your health puts you at a disadvantage to finding work. You will either be in the Limited Capability to Work group or the Limited Capability for Work and Work-Related Activity group – the former has some additional financial support, the latter has more (how much depends on your circumstances).

If you are found to be in these groups, other exceptions may apply – such as removing the requirement to meet the Minimum Income Floor after a start-up period.

Help to Save

If you do qualify for Universal Credit, you can plan to open a Help to Save account, too. The great news is that the rules are changing in April 2025 – previously, you had to earn a minimum of £793.17 in one month to qualify to open one. However, from April, you only need to earn £1 in one month as earnings to be eligible.

Help to Save is a useful savings account with a hefty government bonus. Save between £1 and £50 each month, and the government pays you a bonus worth 50% of the highest balance you’ve saved.

The account lasts for four years, and the bonus is paid to you in year 2 and year 4. The maximum bonus you can receive is £1,200 (£600 in both year 2 and year 4). After the fourth year, it automatically closes and you can’t open another one.

This extra money – and savings habit – is a great way to make sure you’re setting aside some money for your tax bills. Things like Payments on Account can take newly self-employed people by surprise, so an emergency buffer like this helps.

Read our in-depth Help to Save article to find out more.

Access to Work

A little-known resource, Access to Work helps people with mental or physical disabilities get the right equipment or help to do their job well.

Employers can access the scheme to receive a portion of costs for special equipment. Self-employed people, however, can use the scheme to have most or all of the cost covered.

The grant covers things like desk equipment or speech-to-text software. It can also cover things like assisted travel to and from a workplace, or support worker services. You can also get help with work support such as ADHD counselling and work coaches, to help improve your productivity and find ways to cope in work environments.

Access to Work is not taxed and doesn’t have to be paid back. If you are receiving a one-off grant, such as to pay for a standing desk, you may be required to pay this and claim it back from Access to Work.

How to apply

To be eligible, you must have a disability (a chronic physical or mental condition that affects your day-to-day tasks and will last a minimum of nine months). You don’t have to receive disability benefits to qualify. You’ll also need to be in paid work (including self-employment) or due to start paid work imminently.

First, apply online for an Access to Work grant. There’s a slightly different scheme to apply for if you live in Northern Ireland.

You’ll be asked about your health condition, how it affects your ability to work, and what equipment you need to help.

Next, someone will come to assess your needs either at your office or home (if you’re working from home). If, for example, you need a special desk chair, they’ll measure you for this at the same time. You may not require an assessment to receive your grant – or your grant could be delayed until assessments are available again.

If your grant is accepted, you’ll receive the report along with information about the equipment and supplier. You can then order that equipment from the supplier – and either pay direct and be reimbursed, or have Access to Work pay the supplier direct.

If you work from home, you may have to pay a portion of the cost if the equipment could be used for personal use, such as if you have received a grant for a computer or adapted equipment that is useful both for your job and day-to-day activities.

Personal Independence Payment (PIP)

Personal Independence Payment is not means tested, which means you can apply whether you’re in work or not and regardless of how much you (or your partner) earn. It is designed to help people cope with the extra costs that come with having a disability. This might be hiring support workers, getting taxis if you can’t drive or walk with ease, or even things like getting a cleaner once a week so you can focus your energy on work-related activity instead.

You can spend your PIP on whatever you need to, in order to make your life a bit easier living and working with a disability.

There are two parts to PIP, and a lower and higher rate for each. You might qualify for one or both, at whichever rate an assessor deems suitable. The Daily Living component is £72.65 for the lower rate or £108.55 for the higher rate each week in the 2024/5 tax year. The Mobility component is £28.70 lower rate or £75.75 for the higher. Qualifying for one component does not necessarily qualify you for the other.

Find out more and how to apply here.

Business Mentorship

Prince of Wales Trust

Take a look around the website to see if they can help.

Startup Funding

Try the Startup Loans Company or Funding Circle as a first stop.

Peer-to-peer Lending and ‘Angel Investors’

There are lots of angel investor platforms available. Try to meet with (or, these days, video-call) potential investors before signing anything. Always read the small print and make sure you speak to several possible investors before choosing your partner.

Peer-to-peer (P2P) lending is a bit more anonymous. You don’t get the business mentorship but you can access a larger fund.

Investors pay into a P2P fund in return for a percentage on their money. The P2P platform takes a percentage, too. Think of it like a loan – but without the need to satisfy high lending requirements of a high street bank.

Crowdfunding

We’ve all seen the success of Kickstarter and Crowdfunder. But how do they work?

You create an online pitch for anyone to see. This includes details about the products you want to develop, what it does, and what the crowdfunded money pays for. You can entice investors by giving them something in return for their cash. For example, they can buy the product early and at a reduced price, or you can offer them a listing on a sponsors page – anything you think will entice investors.

You have to set a target. Check the details of each fundraising platform and type – some will stipulate that if you don’t hit the target you won’t get any of the pledged cash, while others will let you receive whatever is raised.

If you do reach your funding target, on the other hand, you will get your money. You’ll need to keep accurate accounts to show that you have done with the money what you said you would, and make sure you honour any pledges (such as receiving a product in return for being an early supporter of your new product).

Local Authority Funding

You can also check out Turn2Us Grant Finder which takes you through a questionnaire to help you locate grants for your personal circumstances (rather than to support your business), which can help alleviate some of the financial stress of going self-employed.

Social Enterprise Funding

Social enterprises qualify for all sorts of grants, including those offered by the National Lottery Community Fund.

Loans are available as a funding option, often with a percentage grant. This means you won’t have to pay back everything that’s borrowed, only the loan element. For example, the First Steps Enterprise Fund offers loans up to £30,000 – with 90% of that as a loan and 10% a grant.

Training Grants

The National Careers Service has some funding opportunities for courses, too.

If you’re on a low income, it’s also worth looking at your local adult education centres and courses. They’ll often offer free or discounted places to people on benefits or who can prove a low income.

Look at charities centred around your industry of choice, too. Screenskills, for example, offers bursaries and training opportunities for all kinds of people wanting to work behind the scenes in television and film.

Apprenticeship Funding

Apprenticeships offer a way to staff your company while training the new generation. New businesses have to fund 5% of apprenticeship costs, with the rest covered by a Government scheme.

You’ll need to follow the rules about working hours, and time off for study and exams, and assist with mentoring your apprentice.

Your apprentices could become full-time staff once they pass their course a few years down the line, too!