Universal Credit changes set to hit hundreds of thousands of self-employed workers


The Association of Independent Professionals and the Self-Employed (IPSE) has warned that at least 200,000 self-employed people could be hit badly as the Government brings back the Minimum Income Floor (MIF) for Universal Credit. Before the pandemic, the Minimum Income Floor drastically restricted the Universal Credit entitlement of people on low incomes.

Many self-employed people claiming Universal Credit get benefit payments worked out on the estimates of what they could potentially earn if they were working.

If they earn above the MIF, the actual earnings will be used to work out the benefit.

If not, then the welfare payments won’t be topped up, and they will have to work more to increase the income they receive.

However, since COVID-19 restricted a lot of people working, affecting their benefits, the government suspended the MIF.

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IPSE research showed this led to a 341 percent increase in self-employed Universal Credit claims – from 46,800 to 206,200 in 2020.

Highlighting the disproportionate financial impact of the pandemic on freelancers, IPSE has urged the Government to scrap the MIF altogether or, at the very least, extend the start-up period before it applies from one year to three.

Andy Chamberlain, Director of Policy at IPSE said: “Universal Credit has been an essential lifeline to hundreds of thousands of freelancers during the pandemic – especially those excluded from the government’s SEISS grants.

“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.”

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MIF is simply the minimum wage multiplied by the hours a person thinks they will work, meaning it is different for all people.

Many people who were affected by COVID-19 may face problems as their Universal Credit will suddenly be based on what they are actually earning and not linked to the minimum wage.

They will get less benefits or be forced to work longer hours just to meet minimum wage.

Mr Chamberlain said: “The Minimum Income Floor unfairly stopped self-employed people accessing Universal Credit before the pandemic because it did not account for freelancers’ naturally volatile incomes.

“Rather than looking at the actual earnings of self-employed claimants, it assumed they were making a base level of profit, which in many cases was false.

“Government rightly removed this impediment during the pandemic – and extended the suspension earlier this year.

“But now is not the time to reintroduce the MIF: many freelancers are still in dire financial straits and need this ongoing support.

Poverty charity Turn2us said the average cut to a self-employed worker’s Universal Credit could be around £3,200 a year.

Up to 450,000 households could be affected by the change from this Sunday.

Mr Chamberlin stated: “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 MIF 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.

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“The economy may be opening up, but for many hard-hit self-employed people, it will be a long time before they are in a stable financial position again: government must give them that time and help these freelancers to keep their businesses afloat.”





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