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Working out your income

This is a three-step process:

• step 1: how much profit you made
• step 2: what to take off
• step 3: what did you have left

Step 1: how much profit you made

First work out what profit you made. If you sent in a tax return for the last tax year, tell the Tax Credit Office the profit you showed. If you had more than one business, add up all of the separate business profits.

If you haven't sent HM Revenue & Customs (HMRC) your tax return, you'll need to make your best guess based on your profit so far, which is the difference between all the money you made from doing work or selling goods and the cost of doing that business.

You can get help in working this out by calling the Self Assessment Helpline on 0845 900 0444. It's open from 8.00 am to 8.00 pm every day, except Christmas Day, Boxing Day, New Year's Day and Easter Sunday.

• Find out how to set up a simple profit and loss account Opens new window

What else to include

If your business received other income or profits, for example rental income, add this to your profit: don't show it as ‘other income’ on your tax credits claim form or Annual Declaration form.

Also include any amount you deducted for averaging - perhaps because you're a farmer or market gardener and your profits fluctuate.

Step 2: what to take off

When you've worked out the profit, take off:

• the gross cost of any pension payments you made into a scheme registered with HMRC
• any trading losses from the same business you brought forward from a previous year
• the gross amount of any Gift Aid payments
• any adjustments you made for averaging - perhaps because you're a farmer or market gardener and your profits fluctuate. If the adjustment: 
• increases your profit - deduct this amount from your total profits
• reduces your profit - add this amount to your total profits

• Download a help sheet on tax credits relief for Gift Aid donations, pension contributions and trading losses (PDF, 250K) Opens new window

• Help with PDF files

Step 3: what did you have left?

Take the Step 2 total from the Step 1 total to show your Income from self-employment and put this on your tax credits claim form or Annual Declaration form in the section on income.

If you made a loss in the last tax year, enter 0 in the box.

You can take a business loss from any other income you got during the year or that you and your partner or spouse had if you're making a joint claim. Any remaining loss can be carried forward to future years’ profits of the same business.

• Download a working sheet to calculate relief and losses (PDF, 250K) Opens new window

• Help with PDF files

If you've just become self-employed

If you've only just started working for yourself and had no income from self-employment in the last tax year, leave the ‘income from self-employment’ box blank.

Estimated income

If you do not have all the information you need to work out your annual income, then use what you do have to make a best guess.

For example, if the money you have coming in is roughly the same throughout the year, you can use that amount and multiply it by:

• 52 if you are paid weekly
• 12 if you are paid monthly
• 13 if you are paid every four weeks

If the money you have coming in varies, take the amount you have so far and make a best guess for any remaining payments.

If your estimate is too low, the Tax Credit Office may pay you too much and you'll have to pay it back.

If you have estimated your income, put an x in the estimated income box of your tax credits claim form or Annual Declaration form.

Tell the Tax Credit Office if your income changes

You need to tell the Tax Credit Office straight away if you expect to have more or less money coming in this year, so that they can make sure you don't get too much or too little in the way of tax credits.

• Find out what to do when your income changes

Contact Tax Credit Office

If you need more help you can call the Tax Credit Helpline on 0845 300 3900, or textphone 0845 300 3909 if you are deaf or have a hearing or speech impairment (open from 8.00 am to 8.00 pm every day except Christmas Day, Boxing Day and New Year's Day).

If you're calling from overseas you can also contact the Tax Credit Office on +44 289 053 8192.

More useful links

• Which state benefits to report when making a tax credits claim

• Other income - how to work it out for your tax credits claim

• Income from employment - work it out for your tax credits claim