New Enterprise Allowance scheme - My story

moneysavingkitten

BigAunty wrote: »

Are you bods aware of how the self employed will be treated with regard to change from the array of benefits mentioned (CT, housing benefit and tax credits) under the move to Universal Credits?

Currently, a self employed person with low profits can get a slew of means tested benefits based on their actual low income.

Under UC, the discussion paper mentions that they will be treated as if they have earned the National Minimum Wage (even if they haven't). So this has the potential to greatly reduce many people's state support while they have start up businesses.

No I am not at all aware! Thank you for bringing this up. Do you know when Universal Credits are due to come in? Is there anywhere you can read about them yet?

BigAunty

moneysavingkitten wrote: »

No I am not at all aware! Thank you for bringing this up. Do you know when Universal Credits are due to come in? Is there anywhere you can read about them yet?

Not sure of the timeline but think it starts to kick-in from 2013 and goes onto 2017 until completed, have no idea when the changes are planned that may affect the self employed.

This is the white paper presented to parliament outlining the basic changes. I can't post a link to it but you can find it on the DWP site by googling

"Universal Credit: Welfare that Works"

Page 71

"Some self-employed people under Tax Credits report very low levels of income. We know that in starting up a business that it can take some time before it becomes profitable. But once established we would expect to see a reasonable income from the business activity. So for Universal Credit we are considering introducing a floor of assumed income from self-employment for those registering as such. The floor will be set at the National Minimum wage for the reported hours; clearly profits above this limit may be received and reported. "

Sixer

On the other hand, there are no 'hours' limitations in UC, are there? So self-employed people will have no incentive to report working 16, 24 or 30 hours worked as they do now.

BigAunty

Sixer wrote: »

On the other hand, there are no 'hours' limitations in UC, are there? So self-employed people will have no incentive to report working 16, 24 or 30 hours worked as they do now.

I don't know. I haven't seen any documents that provides this level of detail and that covers whether or not the self-employed will be allowed to attend to their businesses on a part time business, as they can now.

What evidence have you seen that confirms that all self employed will be obliged to run a full time business?

I know that the 16/24/30 hours limit for the (self) employed and tax credits now is quite an artificial way to run a business and that if a notional salary is used, it would encourage them to try and reach independence from the state as quickly as possible, but I really don't know the fine detail of how it will operate.

For example, how long will a claimant be allowed to establish the business before they are treated as if they earn the NMW? Under means tested benefits now, it is indefinately - not a great way to inspire an entrepreneur by the way!

moneysavingkitten

That's interesting to know for the future, hopefully if this business works out I won't need to think about that in 2013/14 though! I will book mark that a read it at a later date. Not sure I can cope with any more than the current rules at the moment.

Sixer

BigAunty wrote: »

I don't know. I haven't seen any documents that provides this level of detail and that covers whether or not the self-employed will be allowed to attend to their businesses on a part time business, as they can now.

What evidence have you seen that confirms that all self employed will be obliged to run a full time business?

I know that the 16/24/30 hours limit for the (self) employed and tax credits now is quite an artificial way to run a business and that if a notional salary is used, it would encourage them to try and reach independence from the state as quickly as possible, but I really don't know the fine detail of how it will operate.

For example, how long will a claimant be allowed to establish the business before they are treated as if they earn the NMW? Under means tested benefits now, it is indefinately - not a great way to inspire an entrepreneur by the way!

I'm in a rush, so no time to look it up, sorry.

But the same DWP briefing documents that suggest notional NMW for the self-employed also talk about removing the arbritrary 16, 24 and 30 hour rules - it's very specific about that as removing one of the barriers to work that currently exist. The link's been posted hereabouts several times and you seem to be aware, so you may know where to find it.

I don't know what you mean - obliged to run a full-time business? The notional NMW idea for UC was to clamp down on people doing an Avon round or other pocket money job, and saying they work 16 or 30 hours at it in order to qualify for WTC and other benefits when realistically, it doesn't need anything like that time. As UC won't have these arbitrary hours requirements, people will stop saying these 'joblets' take them 30 hours. They'll just say how long they do take. It's nothing to do with forcing people to be full time. Quite the reverse.

BigAunty

Sixer wrote: »

I'm in a rush, so no time to look it up, sorry.

But the same DWP briefing documents that suggest notional NMW for the self-employed also talk about removing the arbritrary 16, 24 and 30 hour rules - it's very specific about that as removing one of the barriers to work that currently exist.

Now I understand better. I was focussed on the Self employment paragraph so wasn't aware that the 16,24, 30 hours minimum limits for tax credits was also being tackled under UC.

This is a good view on why those inflexible thresholds choked off the desire for people to increase their income through extra hours. But, still, who would want to work an extra 9 hours, for £17? That's a full day's work for about £2 an hour...)

"Under the current system a lone parent working 16 hours at the National Minimum Wage would only increase their take home pay by £5 a week if they increased their hours to 25 hours. Under Universal Credit the same lone parent would increase their take home pay by £17"

It's a long document but I still didn't find a specific statement that indicated that all the self-employed would be expected to work on a full time basis on their business. Certainly, the 3 current thresholds are going to be scrapped as they say that it's not meeting the needs of employers and individuals, that a lone parent should no longer be put off from applying for a job that is under 16 hours as they will still be elible for UC whereas they wouldn't achieve tax credits now.

"..The net result of how different benefits and incentives stop and start puts pressure on people on low incomes to work no more or less than the number of hours at which they become eligible for Tax Credits. This does not reflect the needs of a flexible labour market or what should be the rational relationship between hours worked and financial reward received. ...

The current system incentivises many people to work no more or less than the minimum hours required to qualify for Working Tax Credit. This fails to reflect the flexible working pattern that modern employers and individuals need. "

Sixer

BigAunty wrote: »

It's a long document but I still didn't find a specific statement that indicated that all the self-employed would be expected to work on a full time basis on their business.

Why are you looking for one? What did I say that made you think that was what the briefing notes were implying or that this was my understanding of what they were implying? You've lost me completely. I'm saying the opposite!

I'm saying the briefing notes remove an incentive for the self-employed to exaggerate their hours to qualify for tax credits (by removing the 16, 24 and 30 hour rules).

My personal view is that it will result in an incentive for the self-employed to under-report their hours (notional NMW for hours worked on a low profit business).

I have no idea why you are looking for an obligation to be full-time.

seeke

@moneysaving kitten

I'm responding here to your post #60. As far as I know, any income you make (from self-employment, or employment) must be directly reported to your local authority, and unfortunately may immediately affect your HB payment. However...I'm not sure if you are aware that you are also entitled to claim working tax credit. This will vary according to personal circumstance, but for me would probably be about £200 a month. This is worked out from your previous years earnings...which if you have been unemployed, won't be much. Anyhow..the point is, if you earn money from your new venture, your WTC for this year won't (normally...there are exceptions!) be affected. This is fairly crucial, because that £200/mo is basically your food, transport, clothing, heat and survival money till the business is up and running.

The HB, OTH, is cut as you earn more. But as you're actually earning that money, you will still have funds to pay your rent/mortgage. I hope this clears up any confusion.

BTW I'm not a benefits expert, so it's possible/probable that some of my advice is inaccurate!

moneysavingkitten

@seeke thanks very much for your reply. That's good to know you should be able to get tax credits, even if you can't get housing benefit, that defiantly helps a bit. I think I need to go and read up more on tax credits, so I can ask them about it at my next appointment at the Jobcentre. Thanks again for the information