AROUND 450,000 self-employed workers face a “huge” cut to Universal Credit payments next month.
It comes as special measures designed to ensure those out of work aren’t penalised if their income drops due to the coronavirus crisis will come to an end next month.
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Back in March, chancellor Rishi Sunak revealed that he was temporarily suspending the so-called minimum income floor (MIF), which is used to calculate self-employed workers’ Universal Credit payments.
But this is due to end next month with the MIF being reinstated from November 13.
MoneySavingExpert.com founder Martin Lewis has urged people to get in touch with MPs now to call on the government to extend the MIF suspension.
He warned that without it self-employed workers could be hit by a “huge sinkhole”.
Martin tweeted: “On November 13, there’s a huge sinkhole awaiting many self-employed as @RishiSunak’s Covid suspension of the Universal Credit (UC) minimum income floor ends.
“Ie, self-employed will be assumed to have earnings for UC calculation even if they don’t. I’d suggest self-employed contact their MP asap. Please share.”
Around 450,000 self-employed workers are affected by the MIF, according to research published by the Institute for Fiscal Studies (IFS) this month.
The think tank believes these workers lose an average £3,200 a year due to MIF calculations, which are based on estimated average annual earnings rather than actual monthly income.
What to do if you have problems claiming Universal Credit
IF you’re experiencing trouble applying for your Universal Credit, or the payments just don’t cover costs, here are your options:
- Apply for an advance – Claimants are able to get some cash within five days rather than waiting weeks for their first payment. But it’s a loan which means the repayments will be automatically deducted from your future Universal Credit payout.
- Alternative Payment Arrangements – If you’re falling behind on rent, you or your landlord may be able to apply for an APA which will get your payment sent directly to your landlord. You might also be able to change your payments to get them more frequently, or you can split the payments if you’re part of a couple.
- Budgeting Advance – You may be able to get help from the Government for emergency household costs of up to £348 if you’re single, £464 if you’re part of a couple or £812 if you have children. These are only in cases like your cooker breaking down or for help getting a job. You’ll have to repay the advance through your regular Universal Credit payments. You’ll still have to repay the loan, even if you stop claiming for Universal Credit.
- Cut your Council Tax – You might be able to get a discount on your Council Tax or be entitled to Discretionary Housing Payments if your existing ones aren’t enough to cover your rent.
- Foodbanks – If you’re really hard up and struggling to buy food and toiletries, you can find your local foodbank who will provide you with help for free. You can find your nearest one on the Trussell Trust website.
When asked in the House of Commons last week if the MIF would be reinstated as planned secretary of state for work and pensions, Thérèse Coffey, said: “That policy is still under review. Clearly, this is a matter of discussion, because the regulations do come to an end.”
The Department for Work and Pensions (DWP) would only reiterate Ms Coffey’s statement when asked to comment by The Sun today.
The coronavirus pandemic has sparked the biggest surge in unemployment in a decade, according to the latest Office for National Statistics (ONS) figures with 1.52million people out of work.
Meanwhile, the number of people claiming work-related benefits rose to 2.73million in September.
But the government is understood to be looking at extending other concessions to those on benefits.
Mr Sunak is “set to keep a £20 a week Universal Credit boost in place beyond next April”, while it’s been hinted that families on free school meals could have help extended in the school holidays if they get Universal Credit.
How does the minimum income floor work?
Self-employed workers whose business has been running for more than 12 months have their Universal Credit payments calculated based on predictions of what they are likely to earn. This is known as the MIF.
It’s worked out by multiplying the national minimum wage for your age group with the number of hours you are expected to work, minus any tax or national insurance payments.
The Sun wants to Make Universal Credit Work
UNIVERSAL Credit replaces six benefits with a single monthly payment.
By the time the system is fully rolled out in 2023, nearly 7million will be on it.
But there are big problems with the flagship system – it takes five weeks to get the first payment and it could leave some families worse off by thousands of pounds a year.
And while working families can claim back up to 85% of their childcare costs, they must find the money to pay for childcare upfront – we’ve heard of families waiting up to six months for the money.
Working parents across the country told us they’ve been unable to take on more hours – or have even turned down better paid jobs or more hours because of the amount they get their benefits cut.
It’s time to Make Universal Credit work. We want the government to:
- Get paid faster: The government must slash the time Brits wait for their first Universal Credit payments from five to two weeks, helping stop millions from being pushed into debt.
- Keep more of what you earn: The work allowance should be increased and the taper rate should be slashed from from 63p to 50p, helping at least 4million families.
- Don’t get punished for having a family: Parents should get the 85% of the money they can claim for childcare upfront instead of being paid in arrears.
Together, these changes will help Make Universal Credit Work.
Join our Universal Credit Facebook group or email UniversalCredit@the-sun.co.uk to share your story.
Your partner’s earnings may affect the level of MIF applied to your claim in certain circumstances, although if your partner is also self-employed you will each have your own threshold.
If you fail to earn the MIF your Universal Credit payments won’t be topped up, meaning you may have to work more to increase your income.
It’s this threshold that was suspended during the coronavirus crisis given many workers have lost their jobs or face reduced hours or lower earnings.
And this is why experts are now worried the self-employed will lose out if they’re still struggling to work.
The MIF doesn’t apply to those who’ve been self-employed for less than a year though.
In this scenario your actual earnings will be taken into account to work out your Universal Credit payments.