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Nearly half a million self-employed face having universal credit cut

Nearly half a million self-employed face having universal credit cut


Hard times: about 450,000 self-employed claiming universal credit face having payments cut, according to the IFS

Nearly half a million self-employed people claiming universal credit face having their payments cut next month.

The government is on course to reinstate rules aligning self-employed universal credit payments with those of full-time workers on the minimum wage.

This is despite the government promising to suspend the cap – or “minimum income floor” (MIF) – for self-employed universal credit claimants “for the duration” of the Covid pandemic.

>See also: 1m self-employed face having to pay tax bill larger than what they earnt

Government officials told the Times that the MIF is set to be reinstated on November 13. However, no decision has been taken yet.

The Institute of Fiscal Studies has estimated that the MIF affects about 450,000 households who would lose an average of £3,200 a year by treating them the same as full-time employees on the minimum wage.

Stephen Timms, Labour chairman of the Commons welfare committee, told the newspaper: “The suspension of the minimum income floor should be extended, as the government said it would be, for the duration of the pandemic. Its re-imposition just when the effects of coronavirus are getting worse will be a heavy blow to many self-employed people, currently struggling to keep their businesses going in extraordinarily tough economic conditions.”

Terribly targeted

However, the Treasury’s heart may be hardened by research from the Resolution Foundation that nearly the same number of self-employed people – 435,000 – have claimed emergency government help for the self-employed, despite suffering no loss of income.

According to the Resolution Foundation survey, self-employed workers received £1.3bn worth of cash from the £12.7bn Self-Employed income Support Scheme, despite seeing no actual drop-off in income since March.

Yet close to 500,000 self-employed workers who were still without any work in September have not been able to claim through the SEISS at all – either because they are newly self-employed or had savings which disqualfied them from the scheme.

>See also: Just when you thought it couldn’t get worse, business rates return in April

The Resolution Foundation called for the suspension of the minimum income floor to be extended to stop penalising low-earning self-employed workers, and for the capital rules preventing the self-employed with savings from being eligible to also be suspended.

Hannah Slaughter, economist at the Resolution Foundation, said: “The UK’s five million self-employed workers have been at the heart of its jobs crisis … the government has provided unprecedented support in response. But it has been terribly targeted – with around £1.3 bn going to freelancers and businesses unaffected by the crisis, while others suffering catastrophic income losses have missed out on any support at all.”

Further reading

Job Support Scheme changes what they mean for your business

 



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