Universal Credit - self employment web forum

This forum has now closed. The deadline for comments was Wednesday 10 January 2018.


Earlier this month we did some calculations which showed that under Universal Credit, a self-employed parent of two is £300 a month worse off than an employee earning exactly the same in a year. This is because of the way Universal Credit is calculated for self-employed people whose income fluctuates month to month.

On November 29 we asked a panel of experts what were the next biggest priorities to fix Universal Credit, and they told us it’s the Minimum Income Floor and making UC work for self-employed people.

We asked for your views on the following questions:

  • What has been your experience of claiming Universal Credit as a self-employed person?
  • Have you been affected by the Minimum Income Floor? If so, how and why?
  • What changes would you make to Universal Credit for the self-employed?
  • What is the nature of your business and how long has it been operational?

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56 Responses to Universal Credit - self employment

Katrina Dunlop says:
January 08, 2018 at 01:20 PM
I am a self employed community gardener. This work is seasonal and some of it is tied to the school calendar as I work with schools and the councils education dept. Some of the work I do I only get paid for delivery ie not admin/prep time etc but I choose to take the work as it is for the common good. I supplement my income with private gardening jobs which is also seasonal. All of this affects the MIF. Some months I earn more sometimes less, some people pay on time and some don't. This also affects the MIF although I have no control over this. Some jobs go over a few weeks /months and get billed at the end - again this affects the MIF. The MIF takes no acccount of the seasonality of a lot of work ie farming/gardening etc. WTC was taken over the whole year so it didn't matter of earnings fluctuated. Also the monthly accounting takes alot of time which eats into the hours I claim I work and reduces time for actual paid work. I have a young family which is partly why I choose to work this way as it is flexible. The MIF means I don't know how much I will get from one month to the next if anything from UC. I have had to seek medical advice for stress and anxiety and the doctor suggested giving up work. The money I get from UC should be separate from the money for the rent/kids so if I get sanctioned at least I won't be made destitute and the kids in care. Attending the jobcentre is a 10 mile round trip and 2 hours wasted when I could be actually putting time that towards finding/doing work. It makes no sense for me to give up a relatively well paid flexible job for a inflexible NMW job in a dead end job. My earnings won't increase but as it would be stable the DWP seems to think it is more valuable. As I have been self employed for just over a year I am still building my business and assets. I continually have to ensure my van is working properly and add to my tools, again this reduces my take home pay. 1 year is not enough to judge a viable buusiness. This is going to affect a lot of voluntary sector people as funders are no longer investing in employing people but only pay for sessional staff. Why should they get penalised again by the DWP when most are trying to help society.
Daryn Manchip says:
January 08, 2018 at 08:42 AM
Submission statement 08/01/18
Dear Members of Parliament,
As a family we currently receive Working Tax Credits and the Child Tax element by entitlement. Both Clare and I are in our early 50's, registered with HMRC through Self Assessment as Self Employed sole traders. We run a organically grown veg box scheme from a small holding we use without any subsidy or public funding. We are one of just two growers established in Eastern Carmarthenshire. Elmo's Kitchen (our business) was established with funding in its first year through the Enterprise Allowance Scheme here in West Wales in 2013.
We have become aware that from June 2018 UC is being rolled out in our postcode.
We are greatly concerned that all our hard work over the last six years to eek out an existence here in West Wales will be destroyed overnight with its implementation. I hold extreme concerns about ‘definitions used’ within UC and we're particularly alarmed by the construct termed 'The Minimum Income Floor' which appears to use ‘The Living Wage’ hourly rates (PAYE) as an income bench mark to determine eligibility.
I do not know how this bench mark can address the real undertakings most Self-employed persons function within. To use a PAYE (The Living Wage rate) value is inappropriate against hours undertaken and valued by self-employed persons. There is also a ‘agency’ conflict between HMRC policy law and DWP policy law as administered against a sole trader or partnership individual. Total income must be taken into account after ‘true’ outgoings which clash between the two agency determinations through self-employment self-assessment criteria (HMRC) and DWP Universal Credit application values used.
If for example one looks at grant funders and how a private trust may fund employed positions say within the UK Third Sector the value of a PAYE position is funded as; one third the cost to pay the employee, one third the cost for the employer to pay HMRC NI contribution and one third the costs as expenses brought about to ‘operate’ said PAYE position. What this value shows is that an hourly rate of a PAYE position does not reflect the true value associated within the payment of the employee – just one third of that time aspect. Therefore, how can one agency ‘truly value the value of a PAYE role if a MIF is applied exclusively at one third the cost in total value as a PAYE role? It does not add up as ‘true values’. The notion (the MIF) exclusively only places value on received income by an employed person (pay as you earn) and importantly not the total cost measured by DWP criteria of a self -employed person by HMRC.
Notions of ‘gainful self employment’ bears no meaning if one's business operates in the current economy, especially in areas such as here in West Wales which is the poorest region in the UK in social economic terms. Since presenting part of this evidence in an earlier submission new light has been cast that up to 4,000 self-employed growers, farm workers and farm owners just in Carmarthenshire alone may be forced to stop working/trading as a result of the introduction of self-employed Universal Credit criteria. This will decimate local economies and force many from self-employed persons into unemployment status. I say this as farming and growing is generally subsidised not only for landowners but the ‘gate access points’ which maintains local farming economies especially here in Wales. Is our government aware of the local damage derived by the introduction of UC affecting self -employed persons such as us?
As you will know a majority of new small businesses fail within the first two years of trading. The implementation of UC in this region will decimate our local economy. Can I remind you also why Working Tax credits were introduced? It was meant not just as a means to lift folk out of poverty and into self-dignity it was also meant to control the informal economy. UC by affect will increase factors associated with the informal economy.
It is sheer madness to roll it out. The effect on us here will mean losing our home, wrecking the chance of my partners son's education as a 12-year-old and destroying any means for us to exist with the legacy of our endeavours. We will be forced to live back on the road, become itinerant and nomadic. We will become a greater problem for social policy makers.
We are not unique, there are 100,000’s of self employed persons who overnight will become victims of a social policy which can only fail communities. Are you also aware of the factual inaccuracies as definitions displayed on the UK Governments web page defining Self Employment perceptions and Universal Credit Social Policy? As growers we require years of foresight to expand our capabilities and by planning with the limited resources we hold to enable organic cultivation and subsequent sales. We have invested time, family and banking finance to provide local choice through organic sales. Please consider the damage this social policy
Cathy Ashley says:
January 07, 2018 at 11:26 PM
I am commenting in as a self-employed person currently receiving Working Tax Credits but concerned about the impending move to Universal Credit. I have been campaigning about Universal Credit and the self-employed since 2013.

I became self-employed in 2003 after being on Unemployment Benefit and Income Support for many years. I have ADHD and do not work easily with other people. Working Tax Credit and Child Tax Credit allowed me to start working for myself, and I built my business gradually while also being a full time student and lone parent with three children of school age, two of whom I home educated.

I sell second-hand goods online and have a stall at events in the summer season. It was not the sort of business that could generate an instant profit. I started with no capital whatsoever, and I had to build up stock, accumulate feedback and cover my fixed costs before there was any profit from which to take drawings. I have been working steadily towards self-sufficiency from benefits, and plan to rely on my continuing business income when I reach pension age in about 10 years time.

My main concerns about Universal Credit are as follows:

With monthly reporting, self-employed income is effectively assessed on the basis of business revenue rather than business profit or personal drawings. It is wholly unworkable that no provision is made for carrying forward of income to meet expenditure not falling within the assessment period. Equipment can break unexpectedly and needing replacing. Expenses vary according to their nature, and according to the business - as does the pattern of income. In my case, my income is clustered around June-July and November-December, whereas my expenditure is spread evenly across the year.

Working Tax Credit assessed profit made in an entire financial year. For the self-employed, Universal Credit should be changed in favour of an annual assessment period. This would bring it into line with current tax provisions, and accommodate the seasonal nature of many UK businesses.

The Minimum Income Floor is manifstly unfair and should be abolished. Benefit for the self-employed should be calculated on the basis of actual earnings, as it is for employed claimants. The self-employed are already worse off than those in employment, due to lack of sick pay and holiday pay etc. Not only does the MIF assume an income that does not in fact exist, but the self- employed person is expected to work 52 weeks per year. Employed workers have a legally enforceable holiday entitlement.

Business profit can be affected by numerous factors such as equipment breakage, recession, new entrants to the market, consumer trends, seasonality etc. Such setbacks to profit do not automatically mean the business is not viable. A self-employed proprietor can make very little profit, but employ a number of other people. We are a nation of small independent businesses and it would be a great shame to lose this. This misguided policy fails to recognise the inherent good of micro-businesses for workers, their families and their communities. It is erroneous to assume that all those on very low self-employed income would instead be able to find full time jobs. The alternative for many will be that they become unemployed, receiving more benefit than if they declared some actual self-employed income (albeit less than minimum wage) and taking part in pointless activities rather than building a business that will in future support them, provide employment and stimulate the economy.

People cannot, in actuality, live on deemed income. I am concerned that some self-employed people now on Universal Credit are actually being forced to give up their businesses because they are financially better off to be unemployed. With families to support and rent to pay, they have little choice. This seems perverse and counterproductive, especially in light of the ‘making work pay’ principle upon which it was based. With Tax Credits the taper was gradual. With MIF it is sudden and punitive. With Housing Benefit, at least rent was secure, whereas with Universal Credit all components are in jeopardy.

It is rare that a business breaks even within a year, and to expect it suddenly to achieve profitability sufficient to take drawings in excess of £11,000 per annum is utterly unrealistic. This policy is prejudicial to sustainable, slow-growth businesses, particularly those in rural or economically deprived areas where it will inevitably be harder to generate minimum wage income. Every time the National Minimum Wage is increased, the self-employed are magically expected to earn more – and if they don’t, their Universal Credit goes down.

I am concerned what will happen to people who are are not in a position to just give up their business. What will happen to farmers with animals and crops? They can’t simply to ‘go and get a job’.

Universal Credit penalises hardworking, enterprising and creative individua
Jason Elliston-Gray says:
January 07, 2018 at 09:27 PM
Currently not on UC but claiming tax cred & Ch Tax cred, so a candidate for transition as rollout continues,
I run a small handyman/domestic service business in coastal rural wales with my partner which is heavily affected by both seasonal working and weather (we have a lot of bad weather year round but particularly in winter), minimum income floor poses a serious problem to the variable nature of our income as we have a large amount of lost days and downtime in the winter months
Based on simple predictive math using current UC calculation methods, it would appear he MIF would make our business unviable over an annual projection, and we would likely be forced to shut down and be forced onto full benefits.
Also we would be unable to take any holiday time without an MIF penalty on that months earnings.
Very concerned about how this will affect us going forwards.
Emma L says:
January 06, 2018 at 03:16 PM
I am a self employed personal trainer and also a single parent through bereavement. I was previously an accountant and therefore have a good understanding of running a business so I set myself up as a Limited Company and registered for PAYE so that I could pay myself a fixed monthly salary based on my predicted pro-rata'd annual salary including allowances for sick, holiday, equipment and other business running costs. I keep total control of all my monthly costs, predicted costs (accruals) and future income (deferred income - which I will discuss in the next paragraph) and over the past year of trading I have been able to exceed the MIF and qualify for WTC and CTC with a small contribution for childcare.

However, under the UC rules, I would have to report on a cash basis each month which, in my line of work, is a completely meaningless figure as all of my clients pay upwards of 10 sessions in advance which means that some months I can take over £1,000 in cash and others completely zero. I also have to accrue for annual leave/sickness, for clients' annual leave/sickness, dips in business like the summer months and other unforeseen circumstances. Sometimes people fall ill or are injured long term and therefore qualify for a partial refund so the cash that I had previously declared becomes irrelevant which is why I defer my income and only base my monthly salary on what I have earned AT THAT POINT IN TIME.

Fortunately the UC won't affect me for a few years but when it does I will be forced back into employment with zero flexibility around expensive childcare and also giving up the chance to really make this career work around being there for my children which was why I gave up a highly paid career in Finance to pursue other avenues.

It can take years to build a business like personal training with some hefty training costs associated with it. All these costs have to come out of my profit and therefore I am currently just breaking even after my salary. Team this with trying to raise children as best you can in the circumstances and it can be a struggle but I am passionate and determined but reliant on that little bit of help from the Government to help this to happen. I spent years working silly hours, paying a grand a month and childcare costs and never seeing my kids and it nigh on destroyed me. I honestly don't want to be that person again.
Matthew Pearce says:
January 06, 2018 at 10:13 AM
For 3 years I had no choice but to rely upon the money I received from JSA. During that time jobcentre plus gave no assistance to find work suitable to me AND made it near impossible to look for work/ improve my chances of work and continue receiving benefits. In the end all the jobcentre provided was more stress on top of looking for work. Given the choice I would never return to the jobcentre for 'help' again
Sam welbourne says:
January 04, 2018 at 08:21 PM
Hi I’ve been stuffed by your system but I know you are going to keep running it and I represent a ‘minority’ as far as your system is concerned. What are the key points? I was validated as self employed and it worked against my interests so now I can’t function properly. You owe me because I had to sell my equipment to pay the rent. And yet DWP thinks I owe them.
Jamie Armstrong says:
January 03, 2018 at 10:51 PM
A few years ago i was working selfemplyed my business wasnt going well so i asked for working tax credits to help with bills etc i recieved around £1500 but because i earned 300 pounds more than i was allowed i now have to pay back the while amount i think its unfair i think i should have paid back the 300 that i over earned but now im in debt because of it
Private Residential Landlord says:
January 03, 2018 at 12:28 PM
I'm a private landlord with a smallish portfolio. I'm a single parent and have raised my two children on my own. I've scrimped and saved to build my portfolio. Child Tax Credits and Tax Credits have supported me so that I have been able to be a useful member of society and provide a much needed service to some very vulnerable single people and families. I do repairs and decorating where I can and project manage larger repairs and overseeing the work. I also do all my own advertising, credit references, and all the legal work for debt recovery and evictions. All this helps to keep rental costs down. I earn less than the minimum wage at £6.32 ph. This is just enough to get by and I am supported by tax credits at the moment. My children are now grown up with the younger one soon to turn 18. Bringing in the MIF will mean that I will have to put rents up if I am to meet a target not set by me but by somebody who has no idea of my circumstances or the circumstances of my tenants. I can't even consider expanding my portfolio now to increase my earnings because of the amount I will have to save for a 20% deposit needed for a buy to let property will take me well over the £16,000 cut off point which didn't exist with Tax Credits. This is no way to encourage enterprising people with great ideas who might well be able to build a big business and employ people - their business is strangled shortly after it's born . I live an extremely frugal lifestyle which has enabled me to save for the properties I have, even though that took 7 years in one case. The MIF is stifling people like me who would otherwise be totally reliant on benefits but who are prepared to work hard, with support from the government, to become a useful member of society, being able to contribute to the welfare of others and set an example to others and inspire them to reach out and achieve their self-employment dreams. As things stand with UC I would now actively discourage anyone from becoming self employed as it looks like they would be worse off than having no job at all. How very sad and dismal the situation has become. I dread the change to UC both for myself and my tenants.
Jacqui Edwards says:
January 01, 2018 at 09:05 PM
Just wanted to add to my previous comment. I think that at the very least, for single-parents who are self employed, the housing element of UC should be kept separate. I know that one of the big issues with UC is a massive increase in homelessness and keeping the housing element separate and therefor not subject to assumed, often fictional earnings, and/or sanctions will at least mean that single parent families are able to keep their home. I think that this should be the case for all claimants of UC but single, self-employed parents are most at risk of homelessness under UC. And this actually costs the government more as the local council needs to be for very expensive temporary accommodation.