Universal Credits - Self Employed

Yamor

Like icequeen said, we're discussing someone who keeps working 35hrs self-employed, can he opt-out.

By the way, I read on a forum for benefit advisors that the government is planning to revise the regulations after the budget.

To icequeen: I agree the plain meaning of the regulations definitely suggest like you say, it's just that I haven't seen anywhere that the government has changed it's mind about this, so I'm trying desperately to fit it in to the regulations!
All I have seen is what Lord Freud said on Report in the HoL, that they'll have the choice to opt-out. (He also that it's possible for the jobcentre adviser to then say the best chance of increasing earnings is to continue the self-employment.)

However, I'd like to ask my original question on the possibility that they can opt-out: what on earth is (or at least, was, when it was assumed they could opt-out) the fuss about the MIF? It only gives self-employed an advantage over employees!

On a separate, but related point:
If the government are still sticking to what they said on Report in the HoL, then conditionality at first will only apply to someone who'd have had conditionality on out-of-work benefits on the old system. That would suggest that self-employed could, at least in the early stages of UC, declare 16 hours of work, not have the MIF (even if there's no choice to opt-out), and have no conditions attached.
It could also be better for some people who currently need to work either 24 or 30 hours to claim WTC, but now would only need 16 to satisfy conditionality.

John_Pierpoint

Can someone explain how Minimum Income Floor (MIF) is meant to work?

An example would be useful.

Yamor

Someone who is self-employed but earning less then his "minimum income floor", will be deemed to be earning his minimum income floor for universal credit purposes (i.e. taper and conditionality).

Each person's minimum income floor is the amount they'd have to earn to remove conditionality - usually 35 hours at minimum wage.

Icequeen99

dktreesea wrote: »

There would be people currently who work part time in the PAYE world, but also have a business they run part time. There don't seem to be any sections in the draft legislation that deal with this scenario.

I had had the impression that, if you were working 24 hours a week in your business, under UC the government could require you to be available to work in the PAYE world for the other two days as a condition of getting UC. So even if the minimum allowable working hours were 24 for the household, the government would still require the person to be actively engaged in increasing their working hours. Which isn't what happens now.

Is this addressed anywhere in the draft legislation? An all or nothing scenario for self employment is impractical surely, given that, of the 4.2 million self employed people in the UK, 1.2 million of them are part time (2012 figures). The vast majority of those people probably won't benefit from UC. But even so, there probably would be a significant number of part time self employed people.

Yes, that scenario is addressed in the draft legislation.

If S/E is your main employment, MIF applies (except in first 12 months) and you won't be subject to any conditionality.

If S/E isn't your main employment, then the conditionality rules seem to kick in and you are required to make up your self-employed earnings to the 35hrs x NMW.

IQ

Icequeen99

John_Pierpoint wrote: »

Can someone explain how Minimum Income Floor (MIF) is meant to work?

An example would be useful.[/QUOTE

Say you are self-employed and it is January. You are a gardener so it is a slow month and also your tax bill is due.

Say your income is £500, your expenses £100 and your tax bill £300.

Your income for UC will be £100. (£500-£100-£300) If you have worked 35 hours each week, that will be your main employment.

However, you will be treated as having income of around £900. This is because under the MIF you are treated as earning 35hrs x NMW less the tax on that amount of earnings (as if you were employed).

IQ

dktreesea

Icequeen99 wrote: »

Yes, that scenario is addressed in the draft legislation.

If S/E is your main employment, MIF applies (except in first 12 months) and you won't be subject to any conditionality.

If S/E isn't your main employment, then the conditionality rules seem to kick in and you are required to make up your self-employed earnings to the 35hrs x NMW.

IQ

Given that there are a significant number of SE people who are only SE because they can't get a job in the PAYE world, people may well be required to try to make up their earnings to the MIF level. A lot of the time, particularly for people who sell products as opposed to services, it isn't labour, or lack of effort that's the problem; it's lack of capital to invest.

At the time a SE person becomes subject to UC, presumably whether or not they are self employed and whether or not this is their only source of income, can both be verified. HMRC would have this information.

So what would be the prudent course of action? The SE person realises that they can't make the MIF, simply because they haven't invested enough in their business, nor are they in a position to invest any more. 90% of the dealers at car boot fairs in our neck of the woods are possibly in this position. (I have nothing to support this, other than looking at the kinds of things they are trying to sell and seeing what they invest at the local auctions over the weeks).

If they want to ensure the continuation of their benefits income, isn't their best course of action to close up shop? Sure, they may not ever get a job, but at least they would still have £20k a year of benefits coming in, give or take, whilever they have school age or younger children, instead of £5k a year.

It seems to me that we are heading in the direction of most other developed nations, where, if you are SE, you don't get help from the benefits system.

BOBS

trying to read this all and make some sense of it!! - as a childminder we are so restricted as to how many children we can look after as our own are taken into account.... then lots of kids are part-time etc etc. My gross wage this year has worked out at £7k - but my hours have varied hugely from 16 hours to 38 hours per week - then I have all my expenses. How on earth will they ever regulate this! - at least with tax credits an overall yearly income was taken into consideration no matter what hours were worked.

lindseykim13

I'm mega confused by this, does it only affect those households where the only income is from SE?
My DH is a full time paye worker and i work part time SE, will i be affected by this change when it comes in? Are they forcing everyone into full time work or just one person in the household?
We only get child tc as i understand it this is moving to UC.

Xign

There's alot of scare stories. Noone really knows. I suspect the impact will not be as terrible as some are predicting. But no one knows

Icequeen99

Xign wrote: »

There's alot of scare stories. Noone really knows. I suspect the impact will not be as terrible as some are predicting. But no one knows

I'm confused by what you say. Of course people know - the Welfare Reform Act 2012 is now law and the regulations have been published in Parliament, unlikely they will change much. We also have the various debates and briefing notes published by DWP.

We don't know all of the detail, but the broad rules are known.

IQ