Professional Contractors and Freelancers not on contract may want to consider claiming Job Seeker’s Allowance.
When between contracts, many people continue to pay themselves their salary through their Limited Company. However, if you are eligible for JSA; there may be other benefits available too.
If you were to make a claim whilst paying yourself a salary issues such as employment contract between you and your company together with minimum wage rules would come into the equation; therefore it would be advisable to P45 yourself from your company thus making yourself unemployed. You can remain the director of your company without causing a problem with a claim.
Qualifying for JSA
To be eligible to make an application you must be:
- Below the state pension age
- Actively seeking work
- Be available for work
- Capable of working
- Unemployed or working less than 16 hours (average) weekly
You can be assessed in two ways for JSA:
Contribution Based
If your Class 1 (the employees NI deducted from salary) National Insurance Contributions (NICS) are up to date for previous year’s you will qualify for contribution based JSA. This is beneficial because the amount paid is not means tested and reduced according to what savings or investments have other than occupational or personal pensions.
Contribution based JSA is paid for a maximum of 6 months and only to an individual, not spouse or civil partner.
A director receiving a salary level of £5720 annually will have paid Class 1 NICs on a cumulative basis, albeit it pennies thus making keeping your contributions up to date.
Because a director’s NICs are cumulative, the NICs will not be due until the final month in the tax year; so if you are making a claim for JSA you will need to have earned the full £5720 in the month that you claim.
If later you find a contract through your company you do not need to pay yourself any further salary in that tax year.
Whilst claiming JSA your NI contribution record is credited by the government and therefore is kept up to date.
Income Based
If your Class 1 NICs are not up to date you will be assessed according to your income, savings and investments.
Income based JSA is means tested. The total value of any capital (savings and investments) together with property (not the main residence) and any other income is subject to the following reductions:
- First £20,000 No deduction
- Next £10,000 £1 per each £1,000
- Next £10,000 £2 per each £1,000
- Balance over £40,000 £4 per each £1,000
For Contractors and Freelancers, all profit retained in your company counts as investments calculated according to your shareholding.
Current Rates of JSA (before means testing)
Individuals aged 16-24 £50.95 weekly
Individuals aged 25+ £64.30weekly
Couples and civil partnerships £100.95 weekly
Other Benefits
Depending on your personal circumstances there may also be other benefits that you can claim:
- Housing Benefit
- Council Tax Benefit
- Tax Credits
- Mortgage Assistance
Entitledto.co.uk provides an on-line calculator tool to give you an assessment of entitlements and your advisor when making an application will further advise you.
Making a Claim
You can make an application on-line or call on 0800 055 6688 (0800-1800 Monday - Friday) or visit your local job centre. Once you have registered you will be required to visit your job centre every fortnight to ’sign on’ and prove that you are actively seeking work.