Figures released this week revealed that 2.85 million people are eligible for Help to Save… but just 4% of them have an account.
But what is it, and how do you get it?
You Need to Get Certain Benefits to Qualify
Universal Credit is an incredibly flawed system. You know it, I know it, even the Government knows it (though they try to say otherwise).
However, one tiny golden crumb of good in all of it, is Help to Save.
“But if you’re on benefits how can you save?!” I hear the less-enlightened of you cry, wailing into your monogrammed handkerchief.
It’s entirely possible – but not easy. There are problems with this account for those who are too ill to work or who are unemployed: living off Universal Credit puts people into severe poverty. HOWEVER: if you’re self-employed, it’s a good safety net.
Universal Credit Can Help the Newly Self-Employed
In your first year of trading, you won’t have to meet the Minimum Income Floor. That means you won’t need to meet a minimum amount of income every single month just to be eligible for your UC payment.
In the first 12 months of your business, that’s incredibly valuable. Some months, especially when starting out, you’ll have more expenses than income. UC can help take the edge off your end-of-month bills panic when you know there is at least something coming in.
For example, let’s say you claim the basic amount for a person over 30 (no housing or disability payments). That’s £317 a month. People in the Limited Capability for Work and Work-Related Activity Group (the disability element for long-term health conditions) will receive an extra sum.
When you earn money, you’ll lose 60p off that UC amount for every £1 earned. However, when you’re registered a self-employed, your expenses are not counted as earnings.
So, say you had a great month near the start, billing £1200. However, you also had expenses that month totalling £1800, due to investing in essential tech and other materials to get the business running. That balances out to -£600, which UC sees as £0 – so you’ll receive your full monthly allowance.
Any Self-Employed Person Can Claim
You don’t have to be a new sole trader to claim UC, either. If business has recently taken a dive – make a claim.
This allowance won’t pay the rent or the mortgage, but it does cover utility bills and basic food. If you need housing assistance, there’s another bit you can claim on top of that to cover your rent.
Other months, you’ll register a profit above the amount of UC you can earn. However, in your first year, you won’t be barred from my eligibility for the next month. When you’re newly self-employed, this is very useful.
In the second year, when you need to meet the Minimum Income Floor, it gets a bit trickier. However, by then, you will probably be turning enough to meet the MIF or even close your UC claim altogether.
Monthly Reporting Helps You Keep Track for Taxes, Too
When you’re self-employed and claiming Universal Credit, you report your monthly earnings and expenses. There’s a set period every month, and you have to report on the same day every month (annoyingly, this also means doing accounts on the weekend, sometimes).
It’s easy to do: you’re sent a reminder to log in to your Universal Credit account. Then, you’ll input various income and expenses amounts when prompted. A few days later, you can check your account to find out how much you’ll be paid.
Monthly reporting helps you keep track of your finances. It’s much easier to keep records for four weeks of a business than an entire year in one go – which means when it’s time to submit your Self Assessment at the end of the financial year, you’ve already got your UC reports logged. It’s super easy to use these to complete your tax return!
Where Does Help to Save Come In?
This little-known four-year savings account will give you a return of 50% on your investment. Yes, indeed, you read that correctly.
You can pay in £1-£50 each month for the full four-year duration of the account. At the end of years two and four, the Government pays you a 50% bonus on the highest balance you’ve held in your account.
You can withdraw money at any time. The bonus is paid on the highest balance you’ve held and not the balance at the time of the bonus payment. Once you’ve qualified for your Help to Save account, you can have it for the full four years. You don’t have to close your account when (or if) you close your UC claim.
So, you could, in theory, pay in £600 over the first year, take out £500 (leaving £100 in the account), and still get a £300 bonus (50% of £600) at the end of the second year.
If you pay in a regular £50 a month for the full four years, you’ll have saved £2,400. You’ll receive £1,200 as a bonus: the first £600 is paid at the end of two years, and the second £600 at the end of the fourth year.
If you close your account before the end of the four years, you won’t get the bonus and you won’t ever be eligible to open the account again. Once your four-year account is done, you can’t apply for another, either.
Couples can each have their own Help to Save if they meet eligibility requirements. So, between you, you could save £4,800 over four years, and be paid a total bonus of £2,400. As couples must submit a joint UC claim (you can’t have an individual claim if you’re living with your partner or have a spouse), it means you can both qualify for Help to Save at the same time. The income must be £569.22 HOUSEHOLD income – not each. So, if you both earn £300 in one month (£600 total), you both qualify for an individual Help to Save account.
How to Qualify for Help to Save
There are just a few eligibility requirements to get you access to this savings account.
- You must receive some part of Universal Credit or Working Tax Credit (or, be eligible for Working Tax Credit and claiming Child Tax Credit instead), and
- You must have earned over £569.22 from paid income in your last assessment period.
So, in the very first month you register a profit in your UC monthly self-assessment of £569.23, you’re eligible to open the account. It doesn’t matter if, for the rest of time, you don’t report that high an income. It just needs to be achieved once.
What Are the Downsides?
The main downside is getting your Universal Credit claim to start with. Many people don’t want the stigma of claiming benefits, or aren’t sure they qualify for them at all.
It’s always worth investigating – you may find you’re entitled to more than you thought!
You have to jump through some hoops to get onto Universal Credit. You then have to report your income every month, which is fiddly sometimes but overall does make tracking your business finances easier.
Other than that…once you’ve got your Help to Save account, you’re earning 50% on your investment. There is NO OTHER way to get such returns – especially when you’re broke and have no huge lump sums to invest in stocks, shares, or other risky investments.
The return is guaranteed, you can withdraw your money when you want, and the bonus payment is not classed as interest (so doesn’t count towards your annual £1000 tax-free interest allowance).
Annie’s been crafting copy for longer than she dares admit (here’s a hint: she started copywriting before Facebook existed).
After working for almost every sector imaginable, she found her passion lay in finance writing. As someone who used to hate maths at school, this surprised nobody more than her. She writes for international banks, recognised mortgage networks, and well-known money advice websites.