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

Jacqui Edwards says:
January 01, 2018 at 08:40 PM
I am not currently claiming UC but will need to do so in the future when transferred from the current tax credits system. I am planning on working as a childminder in the next year or two and will therefor be self-employed and affected by the minimum income floor when switched to UC. My biggest concern is that as a childminder I will be unable to charge parents the same amount per hour that I would earn if I was in paid employemnt. I would need to be minding several children at the same time, for the same amount of hours each day to earn the same as the minimum wage for my age. Ofsted have rules about the number of children you are able to look after at any one time which also takes into account your own children and the space available in your home. There are some childminders who either have no children or maybe just one at home and older children who do not count towards the ratios. These childminders would be be allowed by Ofsted to mind several children at once and therefor earn enough for the minimum income floor. But this will not be possible for every childminder. I have 3 children who are all at home with me full-time and my house is quite small so these two factors will limit the number of children I am able to mind at any one time and therefor the amount I can earn. Also, for the 'funded places' which the government pays for, the rate paid is below the normal hourly rate charged by childminders and they are not allowed to ask parents to top it up. I feel that it is unfair for the government to first underfund the places then expect childminders to be earning the minimum wage when they will not pay it to the childminder in the first place! Another issue with UC and self-employement is giving the self-employed person only 12 months to be earning a profit from the time that they start their business. I believe that this is unrealistic for most small businesses and the time should be extended to 24 months before applying the minimum income floor. Also, having to report earnings every month is just adding to the amount of paperwork and stress that can often go with being self-employed. Childminders already have a large amount of paperwork to contend with and this is just adding more, unpaid hours, to their workload. I believe that the current system of reporting annual earnings to tax credits works well enough and should continue for self employed people claiming UC. When UC affects all families who need help to top up their earnings both parents will be required to be working from when their youngest child is 3. This will mean there needs to be a lot more flexible childcare (which childminders can provide)than there currently is. However, if UC continues the way that it is and insists on the minimum income floor for everyone there will be LESS not more childminders available to provide childcare. I know several childminders who have said that they will need to stop working when switched to UC because of the minimum income floor and claim the jobseekers element of UC instead. So this will cause a double whammy in that there will be fewer childminders to mind the children of parents who are required to be working and the childminders themselves will be adding to the numbers of unemployed. Also,the children of childminders are not using up the free places which the government pays for and this is a saving to the government. I think that with all self-employed people jobcentre advisors need to look carefully at each individual case before deciding what that self-employed person is capeable of earning.
Trisha Brown says:
December 28, 2017 at 11:30 AM
I am a freelance market research interviewer and also a single parent (not my own choice but forced upon me by my ex partner) and I am currently on tax credits. Tax credits work perfectly for me, I summit my tax return at the end of the year, and then call the tax credit help line to report my income for that year. If I have earned too much my tax credit payments are reduced so that I pay back any over payment, if I have earned less than expected my payments go up, its easy, straight forward and mimics the way a self employed person reports there income to the pension and credit department ie yearly reporting. I am losing sleep and my anxiety levels are through the roof after looking into how Universal Credit will effect me once I am transferred onto it. In my industry the work is very ad hoc, you are only paid per interview achieved (which with sometimes very strict quota's can be very few), you can only submit your invoice once the project has completed and some companies can take up to three months to pay invoices. Therefore there are some months during the year where I do not have any income at all, other months where it is low and no where near the assumed Minimum Income Floor and other months where it will be over the assumed Minimum Income Floor. Also why are the self employed expected to work 52 weeks of the year, are we not entitled to take a holiday or be ill- this is discrimination at its worse. Due to the nature of my work, and the implications of Universal Credit I know there will be some months where I will not be able to pay my mortgage, buy food or pay for utilities. How is this fair and just, and how does it equate to 'we are all in this together'. I feel that under Universal Credit the self employed are being unfairly penalized, firstly because of the Minimum Income Floor, and secondly by having to report earnings monthly. Self employment is just not like that, one month your income is high, the next month it could be zero. I definitely think the Minimum Income Floor should be scrapped completely for the self employed, and also the reporting of income should be yearly not monthly so that it is in accordance with the way we summit our tax returns. Basically it should be the same as the way tax credits work. If something works and is not broken, which tax credits do for the self employed, why try to fix it, and spend vast amounts of public money doing it.
Judith Thomas says:
December 27, 2017 at 08:25 AM
I am self employed as a therapist for autistic children. I have been self employed as a sole trader for 14 years and I now have three children 5 and under, my husband is the stay at home parent.
My earnings fluctuate due to the need and availability of my clients. In the summer and at Christmas when many families are on holiday or have a break from therapy my earnings reduce. At times of greater need such as transition, crisis or EHCP review my hours and earnings increase. It is very important to the families that their children have care when it has been scheduled so all therapists work in a team and take on overtime to cover for holidays and sickness if possible, again leading to unpredictable fluctuations in earning. My mum is disabled with 24 hour carers and multiple hospital appointments, and my three young children mean I sometimes need time off work for caring responsibilities the equivalent of compasionate leave or unpaid parental leave for employees, again unpreductable fluctuations in pay.
I am able to predict with a fair degree of certainty what my annual earnings will be and do this for tax credits which are based at my request on my current annual predicted earnings rather than the usual method of using last years figures, again due to the fluctuations in my earning.
I invoice monthly and all except one family pay monthly but some pay immediately, other payments need chasing and can be 4-6 weeks after the end of the month I invoiced for. One family receives funding and pay 4 weekly, so once or twice a year I get two payments in a month, artificailly boosting money recieived during that period despite me maintaining set weekly hours.
For all these reasons the minimum income floor would be inappropriate for my business and penalise me due to the way my hours and income do not tally, for reasons outside of my control that I cannot mitigate, other than declining overtime which is financially and economically detrimental.
Minimum income floor is not a fit for purpose measure for my business, I have been tracking my income against MIF for the last two years as I am genuinely worried that when we switch to UC that there are months I would be penlised and struggle to pay my rent and feed my children. On 4 months in the last two years my income would have been below MIF mainly due to clients being on holiday. I work long term (10 years plus) with children and cannot just take on extra clients to cover such gaps due to the nature of autistic spectrum condition and the time needed to develop social connections. In the same two years I have accurately predicted my annual income for tax and child tax credit purposes and not incurred any tax underpayment or tax credit overpayment.
Annual estimated income would be a much more appropriate measure for my business. It would minimise the risk of me having to leave a successful, established business where I earn up to £65 an hour to instead take a minimum wage full time job. Being self employed means I can fit my hours around my carirng responsibilities and save the government money by not claiming carers allowance or housing benefit despite being entitled to it, not using 'free' nursery spaces for my youngest two children despite being entitled to them as I arrange my hours to accomodate their needs and do a lot of my work in the evenings and weekends.
I have looked but cannot find a full time employed position that would allow me to take time off to take my mum to her hospital appointments, she has a rare auto immune disorder and brain cancer, both conditions require regular appointments at hospitals 30 and 50 miles away from her house, she can no longer drive and is too ill to use public transport due to being immune compromised. A taxi would cost more than £100 per appointment.
I am genuinely scared that if my business is deemend unviable then I will end up having to take a zero hour contract which is the only way I can be an employee but be able to fulfil my caring responsibilities.
Sylvia Lowery says:
December 26, 2017 at 10:56 AM
My son is on the Autism Spectrum, he works as a public speaker and trainer on autism. He get support form Access to work and from his family (mainly me)to work in self employment. His income fluctuates throughout the year. However he will earn above the minimum wage overall. Under Universal Credit he along with other self employed workers he would end up a lot worse off because of the MIF. In a month where his earnings are above the MIF his money will be reduced, but in a month where he earns less it will be assumed he has earned the minimum wage. This leaves self employed workers a lot worse off over the 12 months even thought they are earning the same amount over the year as a person who is employed. These problems need to be ironed out if UC is going to be successful. This policy will drive hard working self employed people out of work. My son is on the autism spectrum and his difficulties would get in the way of him being employed. Why would you want to force disabled people into unemployment? Another change in UC is the means testing, self employed people need savings in the bank to help pay for running the business, often money is spent in advance and it may be months before a client pays, furthermore there may be tax bills. To treat this money as savings demonstrates a complete lack of understanding of how a business operates. In my sons case the monthly reporting places a further burden on me his carer, I will need to keep up with this along with everything else that I do.
paul wilson says:
December 24, 2017 at 03:19 AM
I am self employed gardener and I am not yet on UC, I only get help with rent but when UC comes in I will be quitting self employed as I will NOT reach the minimum income floor. I had my working tax credits stopped without warning and had to sell my tools and my business was ruined. Been living off food banks and hand outs for 18 months found it impossible to rebuild what I had. I had my Working tax credit stopped because I am paid cash and have no bank evidence of business activities. Struggled to find a proper job as I have no work reference from the last five or ten years. Given up with this country, going to try and move somewhere worth living. Sorry!
wendy brooking says:
December 23, 2017 at 10:23 AM
I feel that the self employed people (and I include my self in this category) who are hoping to claim Universal Credit (UC) are being treated very harshly. This action is leading people in to debt, business closure, poverty and eviction.

Points I would like considered

The Minimum Income Floor (MIF) is an imposition from the out set of receiving UC or from when you switch your claim. I feel it ought to be a target to reach over a period of time for both transitioning claimants moving over to UC and to start up's. 12 months grace from the MIF for 'start ups'' is too shorter a period of time.

A weekly or monthly 'snapshot' of income is too smaller time gap.....many businesses have seasonal peaks and troughs. The annual review that has been employed by the Working Tax Credit (WTC) team has worked well for many years. Why change it? I know that some people get in to debt with in the old system but that is their own fault and yes they ought to pay that money back. However it is not reason enough to impose these new punitive measures.

The viability of fledgling businesses, and those transitioning over to the new system is being decided in an arbitrary fashion by those who are not qualified to make such decisions.

Cost allowed are more restrictive that those allowed by the tax office.

Dave Mcmanus says:
December 22, 2017 at 08:58 AM
This is not about self employed it's about the calculation of benefits. It's fundamental y wrong, my wife gets paid on the 15each month and myself on the last Wednesday 2 payment in all yet the D W P seems to be able to calculate over 3payments per month thus denying us and thousands of other their rights to benefit.
The scary part is how many people don't realise this is happening to them and are just accepting it.
Jeannette says:
December 22, 2017 at 07:11 AM
I stupidly applied for uc in nov 2017. I was classed as not gainfully employe. No mif applied. Therefore my pitiful earnings for that month, plus 1/6th repayment of the upfront "help"..I was paid £64. Well..imagine my reaction to that. I wasn't asking for life funding. I was asking for some help to get through a bad spell. I'm 63 yrs of age. I've not asked for help before. To be honest this has totally devastated me.
Derek Steward says:
December 22, 2017 at 03:16 AM
Universal Credit is unfair for the self-employed.
Being self-employed and having a monthly MIF is making a lot of small businesses and sole traders worse of financially than an unemployed person. Therefore universal credit does not make work pay.
Having a monthly MIF does not take in to account the month by month or season by season changes in self-employed earnings.
A gardener works and earns more in spring and summer, loses benefits because if monthly profit is over MIF benefits are worked out using actual earnings. In autumn and winter work and earn less, lose benefits because benefits will be worked out using MIF even if monthly profit were get less.
A farm worker may not have any livestock or crops ready to sell, but still have outgoings to pay. Their monthly profit will be a minus figure, but benefits worked out at MIF, lose out. When they do sell something their monthly profit may be well over MIF lose out because benefits worked out using actual profit.
Having a monthly MIF does not allow self-employed people to save money for replacing/ repairing equipment, unexpected bills, slack months, illness or holidays.
Having a monthly MIF has and is causing people to close down their businesses and go unemployed.
Fiona Kirton says:
December 21, 2017 at 10:07 PM
The mif expectations are totally unrealistic and cannot have been designed by anyone with any real expertise is being self employed. I will be unable to be self employed as a disabled person who cannot work full time under these regulations.