Self‑Employed? How to Calculate Earnings for Carer’s Allowance (Without Losing Your Claim)

If you’re self‑employed and caring for someone at least 35 hours a week, you may be entitled to Carer’s Allowance (CA). However, the rules around what counts as “earnings” can feel daunting, especially when your income isn’t the same each week. Getting it right is vital—if your weekly earnings go over the CA limit, even for a short period, you could lose your entitlement and may have to repay money. This article explains, in plain English, how to work out your self‑employed earnings for CA, what you can deduct, and how to keep your claim safe.

What Counts as “Earnings” for Carer’s Allowance?

For Carer’s Allowance, “earnings” means your income from self‑employment or employment after certain deductions. The Department for Work and Pensions (DWP) looks at your net earnings, not your turnover or the amount you draw from your business. Here’s what you can deduct before working out your weekly figure:

• Income tax actually paid: Only the tax you’ve paid for the period in question can be deducted.

• National Insurance contributions actually paid: Again, only what you’ve paid, not what you expect to pay.

• Allowable business expenses: These must be wholly and exclusively for your work. Examples include:

  • Equipment or tools needed for your job (such as a laptop used only for work)

  • Specialist clothing (like uniforms or protective gear)

  • Travel costs between different workplaces (not your commute from home)

  • Office supplies or software subscriptions

• Pension contributions: You can deduct 50% of your contributions to a personal or workplace pension.

• Care costs while you work: If you pay someone to look after the person you care for, or your children, while you work, you can deduct up to 50% of your earnings for these costs. The carer must not be your spouse, partner, parent, child, or sibling.

Some types of income do not count as earnings for CA. These include:

• Occupational or private pension income

• Contributions from someone you live with towards your living costs (unless they are a tenant or boarder)

• The first £20 per week and 50% of the rest of any income from someone boarding in your home

• Loans or advances from your employer

It’s important to check the current CA earnings limit each year, as it can change. Always keep clear records and evidence of your calculations.

How to Calculate Your Weekly Self‑Employed Earnings

The DWP expects you to work out your average weekly earnings, even if your income is irregular. Here’s a straightforward method:

1. Start with your business income for the period you’re assessing (usually a week, but you can use a longer period and divide it up).

2. Subtract allowable business expenses that are wholly for work.

3. Deduct income tax and National Insurance paid for that period.

4. Subtract 50% of your pension contributions if you pay into a pension.

5. Deduct eligible care costs (up to 50% of your earnings), as long as the care provider is not a close relative.

6. Convert to a weekly figure. If your income varies, you can use an average over a suitable period, but keep a clear record of how you worked it out.

A simple spreadsheet or notebook can help you keep track. List each deduction, the date, and keep receipts or bank statements as evidence.

Example Calculations

Let’s look at two examples to make things clearer.

Example 1: Regular Income

• Business income (per week): £360

• Business expenses (materials, software): £110

• Tax and NI (per week): £20

• Pension contributions: £20 (so £10 is deductible)

• Care costs while working: £40 (all allowable, as it’s less than 50% of earnings and not paid to a close relative)

• Calculation: £360 − £110 − £20 − £10 − £40 = £180

If the CA limit is, for example, £151 per week, you would be over the limit and not eligible for CA that week. You may need to review your expenses or the timing of your work and care costs.

Example 2: With Travel Between Workplaces

• Business income (per week): £250

• Expenses: £60 (tools), £25 (fuel between workplaces)

• Tax and NI: £10

• Pension: none

• Care costs: £30 (all allowable)

• Calculation: £250 − £60 − £25 − £10 − £30 = £125

In this case, your weekly earnings are below the CA limit, so you would remain eligible.

Keeping Good Records

Good record‑keeping is essential. Keep all invoices, receipts, and bank statements for your business income and expenses. Label which costs are business‑only, and keep a weekly log of your working hours and your caring hours. If you have a week with unusually high income (for example, a one‑off job), make a note explaining the spike and the date. This can help if the DWP asks for evidence or if your claim is reviewed.

Common Pitfalls to Avoid

Many carers lose out on CA because of simple mistakes. Here are some to watch for:

• Not keeping receipts or clear records for expenses

• Claiming care costs paid to a close relative (not allowed)

• Confusing business drawings with profit (CA is based on profit after deductions)

• Deducting the full amount of pension contributions (only 50% is allowed)

• Missing the weekly limit due to a one‑off payment and not flagging it

Final Checklist

Before submitting your figures, make sure you have:

• Calculated weekly earnings with evidence

• Applied all allowed deductions correctly

• Checked that care costs are not paid to a close relative

• Checked the current CA weekly earnings limit

• Documented at least 35 hours of caring per week

Feel less anxious and more confident:
Caira is your new bestie!👱🏼‍♀️🌸 Get answers and drafts in seconds for public, family, probate, conveyancing, criminal, employment, medical negligence, commercial and public law. All backed by 10,000 legal documents for England and Wales.

Upload documents, screenshots and photos for even more relevant responses. Free 14 days trial in 1 min – no credit card required, afterwards just £15/month on our website. Continue chatting now. https://www.unwildered.co.uk

Disclaimer: This blog post provides general information for educational purposes only. It is not legal advice. Outcomes can vary based on your personal circumstances.