Self-employed and claiming Universal Credit

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Posted on6 Aug 2021

If you are self-employed, you may be able to claim Universal Credit to top-up your income.

Currently the amount of Universal Credit payable will be calculated based on your monthly earnings. However, from the 31 July 2021, Universal Credit payments for those who are self-employed might be based on the ‘minimum income floor’ instead.

The minimum income floor is the amount you are expected to earn from self-employment each month, which may be different to the amount you actually earn. This could result in your Universal Credit payments reducing substantially.

From 31 July 2021, the minimum income floor might apply to you if (for at least a year) you have been in ‘gainful self-employment’. This means that your self-employment work is your main job, you undertake it regularly and expect to make a profit.

If the minimum income floor does apply to you, the amount will be based on the national minimum wage for your age group and the number of hours you agreed to work through your ‘claimant commitment’. Current national minimum wage rates are:

  • Aged 23 or over £8.91 per hour
  • Aged 21-22 £8.36 per hour
  • Aged 18-20 £6.56 per hour
  • Aged 16-17 £4.62 per hour

To work out the minimum income floor:

  1. Multiply the national minimum wage for your age group by the number of hours you are expected to work;
  2. Multiply that number by 52; and then divide that number by 12 to get a monthly figure.

Example – Before 31 July 2021

Abby is a 40 year old self-employed cleaner. Her claimant commitment says that she is expected to work 37 hours a week. The national minimum wage for her age group is £8.91 per hour. However, Abby has only been able to work 25 hours per week, which gives her a total monthly income of:

  • 25 hours per week x £8.91 per hour = £222.75 per week;
  • £222.75 per week x 52 weeks = £11583.00 per year; and
  • £11583.00 ÷ 12 = £965.25 per month.

Before 31 July 2021, Abby’s Universal Credit payments will be calculated based on her actual earnings of £965.25 per month.

Example – After 31 July 2021

Assuming Abby’s situation remains unchanged, the minimum income floor will be used to calculate her Universal Credit payments:

  • 37 hours per week x £8.91 per hour = £329.67 per week;
  • £329.67 per week x 52 weeks = £17142.84 per year; and
  • £17142.84 ÷ 12 = £1428.57 per month.

After 31 July 2021, Abby’s Universal Credit payments will be calculated based on her expected earnings / minimum income floor of £1428.57 per month. Abby’s Universal Credit payments are likely to reduce by hundreds of pounds per month as a result.

If you feel that you or someone you know may be adversely affected by the reintroduction of the minimum income floor rules, contact our Money & Benefits Advice team on 0800 5870211 or at [email protected]. Our advisers can provide further details and support, including assistance with benefit claims and budgeting.