Calculating net profits of a self-employed earner

Net profit is calculated as follows:

• Establish the gross receipts of the business;
• Deduct allowable business expenses; (view the Enter allowable business expenses into the calculator guidance)
• Deduct income tax;  (view the Check income tax deduction guidance)
• Deduct National Insurance contributions (view the Check national Insurance contributions guidance)
• Deduct half of any personal pension/retirement annuity contract;
• Deduct costs for childcare or replacement care for the cared for person up to 50% of net earnings.

The Self-Employment Calculator will automatically calculate the client’s net profits when the client advisor populates relevant fields with information about the client’s earnings. See Self-employment calculator | Social Security Scotland

Averaging self-employed earnings

Where a client is self-employed, we calculate their weekly net profits to determine their eligibility.

We work out the average weekly profits over either:

• 52 weeks  
• another period if the client has been self-employed for less than a year or had a change in circumstances that affected their usual earnings pattern

Like for employed clients, earnings can be averaged over a period that would more accurately reflect the client’s usual earnings.

The period that profits are averaged over is often called the ‘assessment period.’

See Carer Support Payment Regulations, Schedule 2, paragraph 10.

Some examples of when another period would be appropriate to average self-employed earnings include:

• A client has only been self-employed for three months. Multiply their profits by four and divide the result by 52.
• A client has been self-employed for ten months but took on a new contract to supply more goods. This meant that they were earning more than before. Average their earnings over the number of weeks since they took on a new contract.
• A client has been self-employed for nine months but started earning less when they reduced their operating hours. Average their earnings over the number of weeks since they were operating at those hours.

For more details see the Carer Support Payment Regulations, Schedule 2, Paragraph 10(1)(b)

Seasonal self-employment

If a client is seasonally self-employed, we need to consider whether they are currently self-employed if they apply in a period in which they are not working, or where there are changes during an award. In these situations, the client is considered self-employed if:

• There is a reasonable prospect of work in the near future;
• There is agreed work upcoming;
• They are regarded as self-employed by HMRC;
• The business is regarded as a going concern by the person or the business’s bankers or any creditors.

The client advisor would need to decide if the self-employment continues throughout the year, or only for a part of it.

Earnings from royalties or copyright

Money from royalties and copyright is counted as earnings for Carer Support Payment. Clients may earn royalties or money from copyright if they:

• Write books, articles or music and get paid each time they’re sold or used
• Create art, software, or designs and licence them to others
• Own a patent or invention and receive payments when others use it
• Act in films or TV and get paid when the show is repeated or streamed

If a client receives money from either:

• royalties
• allowing someone to use or license their copyright, design, patent or trade mark

and

• the client is the first owner of that intellectual property

these payments are treated differently from normal self-employed earnings. Each payment is taken into account over a separate assessment period. The number of award weeks that each payment should be spread over is worked out using the following formula. (Amount of payment) / [(Earnings limit + 1p) + (Client’s total disregarded and/or deducted earnings)]14

For more details see Carer Support Payment Regulations, Schedule 2, Paragraph 10(2)

Any part weeks should be disregarded. The period begins on the first day of the award week in which the client receives the payment. This rule ensures that occasional royalty or licensing payments do not unfairly push a client over the earnings limit for a single week.   

Please note these illustrative examples have been worked out using the 2025-26 earnings threshold. For a list of current and previous threshold amounts please see operational guidance on benefit rates.

Types of self-employment

There are broadly four types of self-employment. Each type of self-employment has their own rules for calculating earnings:

Childminders

The weekly earnings of a childminder are established as follows:

• Establish the gross receipts for the assessment period
• Calculate one third of gross receipts but make no deductions for business expenses
• Calculate deductions for income tax, National Insurance contributions and half of pension contributions.
• The rest of earnings are completely ignored.

For more details see Carer Support Payment Regulations, Schedule 2, Paragraph 12 (9)

Share Fishing

For share fishers, earnings is the net profit they receive from their job, and is calculated as follows:

• Establish the gross receipts of the boat during the assessment period;
• Deduct from the gross receipts the allowable expenses of the boat, and the individual
• Work out the share of the proceeds of the receipts the individual is entitled to. This will be according to the agreement for distributing the proceeds of the fishing boat;
• Deduct from this figure amounts of notional income tax and notional NI contributions, and half of any premiums paid into a personal pension or under a retirement annuity contract;
• Deduct the correct disregards;
• The remaining figure is the relevant share of the net profit.

For more details see Carer Support Payment Regulations, Schedule 2, Paragraph 12 (1) (b) & (c)

Partnerships

The weekly earnings of partnerships are calculated as follows:

• Establish the gross receipts of the whole business;
• Deduct any allowable expenses incurred by the whole business, which establishes the net profit of the business;
• Calculate the partner’s share of the net profit of the business.
• Make deductions for income tax, National Insurance contributions, and half of private or occupational pension contributions.

For more details see Carer Support Payment Regulations, Schedule 2, Paragraph 12(1)(b)

Crofts or small holdings

Earnings from a croft or small holding may be received by a sole trader or a client in a partnership. Those earnings should be calculated in the same way. The client should produce an annual statement giving details of:

• income from sales (including subsidies)
• expenditure (including for example, seed, fertiliser, feed and labour)

This statement should be used to calculate the person’s net profit.

People who rent out property as a business

If rent received is less than £20 a week, all of this should be disregarded. If rent is £20 or more, only the first £20 should be disregarded. This applies when all of the following are true:

• the person getting the rent lives in the same home
• the other person living there is paying them under a contract
• payments are for living in the property
   

This includes where the person paying rent is a family member of the lodger e.g. a parent paying rent for their child who lives in the house.

People who provide board and lodging
 

If someone provides board and lodging, this means providing a room to live in and meals as part of the arrangement.

If payments received in a week are £20 or less, all of this should be disregarded. If payments are £20 or more, the first £20 and half of the remaining payment should be disregarded.

Earnings from this are calculated as follows. For each boarder:

• Adding together all payments received in one week;
• Deducting £20
• Deducting 50% of any amount over £20

Example 1

Ana has two boarders. In the week in question one boarder paid £55 for a four night stay and the other paid £12 daily for a five night stay. The amount of income to be taken into account is:

Boarder 1:

Payments for the week - £55.00

Deduct £20 = £35.00

Deduct 50% of the remainder - £17.50

Total for boarder 1 = 17.50

Boarder 2:

Payments for the week (£12 x 5 = £60.00

Deduct £20 = £40.00

Deduct 50% of the remainder - £20.00

Total for boarder 2 = £20.00

Grand total (boarder 1 plus boarder 2) = £37.50

For more details see Carer Support Payment Regulations, Schedule 2, Paragraph 14 (b) & (c)

Where a client has a number of tenants or boarders during an assessment period.
 

If we are assessing earnings over a longer period and a client has had a number of subtenants or boarders during this time, they may not have records that would allow for this specific calculation to be completed.

For example, if there are a number of short-term tenants or boarders, the client’s records may not show how many weeks each tenant stayed, which weeks they stayed for, and if these weeks overlapped.

In general, it is likely to be complex to complete this calculation where a carer has multiple tenants or boarders in a period. In this situation we should try to find out from the client what their normal income from letting out property or boarding would be. This should include the number of tenants/boarders they have space for at one time and look at the information available on their income from the business to determine what they would normally receive in income from this.

Example 2 – more than two boarders

Kevin runs a bed and breakfast from his home, offering one room to guests. Over a 6-month assessment period, his records show that 15 people stayed, with total receipts of £2000. He does not have records of the exact days or duration of each stay.

Kevin advises that:

• He charges a standard weekly rate of £100
• He only has one room, so only ever hosts one guest at a time
• There were only a few weeks without guests during this period
   

We could calculate Kevin’s typical income from the business as follows:

Standard weekly rate: £100

Deduct £20 : £100 - £20 = £80

Deduct 50% of the remainder: £80 / 2 = £40

Standard boarding income is £40 per week.

The total standard amount following deduction is less than the earnings threshold. and Kevin did not have tenants every week, Kevin’s earnings from board and lodging would be under the threshold. If Kevin has no other earnings he could be awarded Carer Support Payment.

Example 3 – more than two boarders

Ella runs a small bed and breakfast in their home, offering two rooms to guests.  Their records of the business show that 25 people have stayed there during the 6-month assessment period.

Total receipts during this period were £5,500. Ella does not have records of when each person stayed or when.

Ella advises that:

• They have two rooms,
• Room 1 is normally charged at £127 per week
• Room 2 is normally charged at £85 per week
• Both rooms were consistently occupied throughout the period
   

If the overall total of £5,500 was split across the 26 weeks, Ella’s income from the business would be £211.54. This is more than the earnings limit. However, we can calculate what the deductions would be from the standard weekly rates. 

Room 1 (£127 per week)

Standard weekly rate for Room 1: £127

Deduct £20: £127 - £20 = £107

Deduct 50% of the remainder: £107 / 2 = £53.50

Standard boarding income from Room 1: £53.50

Room 2 (£85 per week)
Standard weekly rate for Room 2: £85

Deduct £20: £85 - £20 = £65

Deduct 50% of the remainder: £65 / 2 = £32.50.

Standard boarding income from Room 2: £32.50.

Total standard income from both rooms: £53.50 + £32.50 = £86.00

As the total standard amount following deduction is less than the earnings threshold, Ella’s earnings from board and lodging would be under the threshold. If Ella has no other earnings they could be awarded Carer Support

Please note that the illustrative examples in this guidance use the earnings threshold for 2025-26. For current and previous earnings threshold amounts see opearational guidance on benefit rates.

Allowable business expenses

For self-employed clients, we can deduct expenses from gross receipts for things that are:

• directly related to the client’s business
• necessary for the day-to-day running of the business

This can include:

For more details see the Carer Support Payment Regulations, Schedule 2, Paragraph 12(3)(a)

Allowable business expenses do not include:

For more details see the Carer Support Payment Regulations, Schedule 2, Paragraph 12(5)

Example of leasing a vehicle

If a client leases a vehicle for business use, the regular lease payments are allowable because the vehicle is not owned. These expenses can be deducted from the client’s gross receipts.
However, if the lease includes a purchase component, the payments are considered capital repayments and are not allowable. These costs cannot be deducted from the client’s gross receipts.

If the client pays one regular amount for leasing the vehicle and this has two parts as above, they should provide evidence of what the rental component is in order to deduct this from their gross receipts.

Distinguishing between business and personal use

If a client has an expense for something that is used for both their business and personal reasons, we should only count the business part of the cost an allowable expense.

Example of using a car for business and personal travel

Jasmine is a self-employed cleaner. She uses her car to travel to different clients’ houses for cleaning jobs. She also uses her car for personal trips like shopping and running errands.

When she applies for Carer Support Payment, a client advisor requests evidence of what she usually spends on fuel. Jasmine uploads copies of recent receipts and estimates that 75% of this cost is for business travel.

To calculate the allowable expense:

• the advisor averages petrol costs across the receipts provided
• then applies the estimate: 75% of the average cost is deducted from gross earnings as an allowable expense  

Example of utilities from working from home

Alex is a virtual assistant and works part-time from home. Alex pays for gas, electricity and internet broadband which he uses both for work and personal use.

When Alex applies for Carer Support Payment, a client advisor requests evidence of what Alex usually spends on energy and internet broadband. Alex:

• uploads copies of his recent utility bills
• advises that he works 16 hours a week

To calculate the allowable expense:

• the advisor averages the utility costs across the bills provided
• then calculates the proportion of time Alex works:
  • 16 hours out of 168 hours in a week = 9.5%

9.5% of the utility bill can be deducted from Alex’s gross earnings.

Principles of deducting allowable business expenses

We can deduct an expense from a client’s gross receipts if it was directly related to and necessary for the day-to-day running of the business.

Whether an expense is an allowable business expense will depend on both:

• The nature of the client’s work
• The purpose of the expense

This means the decision maker should consider what kind of work is relevant for the client’s business and whether the expense makes sense for those activities.

Example of deciding whether an expense is allowable 1

Amnah is a self-employed garden designer. When she applies for Carer Support Payment, she tells the Agency that she has expenses for website hosting to advertise her business, utilities for working from home and stationery. These expenses are:

• directly related to Amnah’s work
• necessary for the day-to-day running of her business

They can be deducted from her gross receipts.

Example of deciding whether an expense is allowable 2

Bradley is a self-employed online tutor. He says that he has expenses for fuel costs for his car. Fuel costs would neither be:

• directly related to Bradley’s business
• necessary for the day-to-day running of his business

These costs cannot be deducted from his gross receipts.

When supporting information is received to evidence an allowable business expense, the decision maker should be reasonably satisfied that it is more likely than not (on the balance of probabilities) that the expense was:

• paid for by the client
• directly related to their business
• necessary for the day-to-day running of the business 

Clients may provide:

• receipts or invoices
• statements
• bank statements
• breakdowns of costs
• estimates or explanations of how the expense relates to the business