Thousands of self-employed workers on Universal Credit could see payments CUT from tomorrow

THOUSANDS of self-employed workers claiming benefits could see their payments cut from tomorrow by thousands of pounds.

The Universal Credit minimum income floor will apply again from tomorrow after it was paused because of the Coronavirus pandemic.

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Because of the pandemic, the government took away the rule used to calculate the benefit payments for people working for themselves and earning low amounts.

The return of the Minimum Income Floor will end a benefits boost for the self-employed and cut the amount of Universal Credit they get.

It was temporarily removed in March 2020 as part of the emergency coronavirus budget.

The suspension was to help self-employed Universal Credit claimants who would have lost income due to self-isolation or restrictions on trading in the pandemic.

The Minimum Income Floor will be reinstated tomorrow (August 1) as the government rolls back Covid-related financial support.

At least 200,000 self-employed will be affected by the return of the Minimum Income Floor, according the Association of Independent Professionals and the Self-Employed (IPSE).

According to poverty charity Turn2us, the average cut to a worker’s benefit could be around £3,200 a year.

Sara Willcocks, head of external affairs at Turn2us, said: “Self-employed people have been hit hard by the pandemic, and the suspension of the minimum income floor was a small but vital step in helping this group of workers stay afloat.”

IPSE and Turn2Us are bothing calling on the government to make changes to the rule, including scrapping it altogether.

Ms Willcocks said the minimum income floor is “just another arbitrary benefit cap that breaks the link between need and entitlement” and that it is not the time to cut people’s income.

She said: “We urge the government to keep the minimum income floor suspension, otherwise we risk seeing an increase in poverty this winter.”

Andy Chamberlain, director of policy at IPSE said that Universal Credit has been a “lifeline” for hundreds of thousands of freelancers during theb pandemic – especially those who are not eligible for the government’s grants for the self-employed.

He said: “Although we understand that as the economy opens up, government must adjust its support schemes, it should not start by pulling the rug from under the worst-hit self-employed.

“Now is not the time to reintroduce the Minimum Income Floor: many freelancers are still in dire financial straits and need this ongoing support.

“We urge government to scrap the MIF so struggling freelancers can continue to get support.

“Or, at the very least, government should extend the ‘Start-Up Period’ when it does not apply from one year to three, allowing newer freelancers – who are often the most financially fragile – a bigger grace period to get their businesses off the ground.” 

The government is also pushing ahead with plans to end a £20 per week Universal Credit uplift in September, which will further cut the benefits of the self-employed.

A Government spokesperson said: “We are committed to supporting those most in need, spending billions more on welfare, including support for the self-employed.

“We will continue to assess how to best provide support as we build back better.”

What is the Minimum Income Floor?

Self-employed workers who claim Universal Credit have their payments based on a prediction of what they could earn – rather than their actual earnings.

This figure is known as the minimum income floor.

It’s worked out by multiplying the national minimum wage with the number of hours you agreed to work.

For example, if you’re over 23 years old and working 35 hours a week, your minimum income floor would be £1,351.31 a month, according to calculations by Turn2us.

But if you earned less than that in a month, the figure will still be used to work out your Universal Credit payment.

This means your benefits payment will be smaller, and you may have to work more to boost your earnings.

How will the Minimum Income Floor affect your benefits?

Turn2us has estimated that the reinstatement of the Minimum Income Floor will cut payments by £3,200 a year, on average.

The minimum income floor might apply to you if being self-employed is your main job, you work regularly and expect to make a profit. 

But you’ll also need to be in the “all work-related requirements group” – this means you’re expected to work or look for work.

However, it is not applied for up to 12 months after you begin self employment – giving you time to set up your business.

You can find out what Universal Credit work-related activity group you’re in by checking your account online.

The reintroduction of the minimum income floor will reduce your benefits payments if you’re unable to work due to having to self-isolate or if your business is affected by restrictions.

This is because your monthly earnings will likely be below the threshold – but your payments will be based on full-time earnings again.

If you’re concerned about the impact this will have on your income, you should speak with your work coach.

They will also be able to help you work out how much money you will lose.

Your work coach should have some discretion to allow you to continue without the minimum income level if they decide you have a strong enough case.

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This post first appeared on thesun.co.uk