Universal Credit: Self-employed

Department for Work and Pensions written question – answered on 23rd April 2018.

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Photo of Catherine McKinnell Catherine McKinnell Labour, Newcastle upon Tyne North

To ask the Secretary of State for Work and Pensions, whether the minimum income floor in the universal credit system can result in self-employed people in receipt of universal credit receiving less than employees in receipt of that benefit when their annual earnings are identical.

Photo of Alok Sharma Alok Sharma The Minister of State, Department for Work and Pensions

We are aware that for many self-employed, particularly those with seasonal businesses, their earnings often fluctuate from month to month, and they need to budget and plan for this. Self-employed Universal Credit claimants are no different in this regard.

Universal Credit supports people in self-employment, where self-employment is the best route for them to become financially self-sufficient. As part of that, for those claimants expected to seek work, who are gainfully self-employed and not within a year of starting their self-employment, we apply a Minimum Income Floor (MIF). This is an assumed level of monthly earnings, based on what they could expect to earn each month at the National Minimum Wage.

The MIF is designed to encourage those reporting very low self-employed income to increase their monthly earnings. This means that, where a self-employed claimant’s monthly earnings are below their MIF level, the MIF level is taken into account in assessing the claimant’s monthly Universal Credit payment. For this reason, they can receive a lower amount of Universal Credit than an employed claimant earning a comparable monthly sum, but not subject to the MIF.

Some self-employed claimants will respond to this by increasing their monthly earnings from self-employment, some will choose to work as an employee, and others will combine the two.

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