Universal credit and minimum wage floor - question.

earthbound_misfit

I know there have been several threads/discussions on this but I wanted to ask a specific question.
I am presently on ESA and figuring out how to return to work in the long run. I am interested in self employment and have a few ideas/skills I can use. My aim is to be better enough to start this around spring time... so that would give me about 6 months to build up business/see if it's actually feasable as a long-term option, before Universal Credit is brought in.
I have worked out I need to earn £90/week + WTC (single, childless) to get the same money as I would if unemployed on JSA+HB+CTB. (Obviously I'd want to earn as much as possible but this is a sort of minimum level necessary, I have some savings for any initial outlays etc).
I may be entitled to the disability element (will be on MH team's books and receiving therapy) but it's a very grey area as to whether this counts as "receiving regular treatment under the supervision of a medically qualified person"; there doesn't appear to be any legislation on definitions from the DWP (contacted a charity who specialise in these things). I'm actually going to write to my MP about this. So for now assuming just the usual WTC.

(1) Now... when subject to the minimum income floor, is it ok for me to explain I work 35+ hrs a week working on the business but do not earn minimum wage over that time? I know they will calculate entitlement as if I am earning that, which is fine; I'm just worried they will make me declare I am getting minimum wage in order to get tax credits.

(2) Secondly, if they assume you're earning minimum wage, then does that info. pass to HMRC so they tax you accordingly? Or will HMRC take actual earning into account?

(3) Oh... just remembered TC's are done by HMRC! Presumably they are going to be administered by DWP under Universal Credit? Are DWP+HMRC merging?

HappyMJ

1 - Not for a long time yet. Just declare your actual profit and claim tax credits, HB and CTB on your actual profit. Eventually (and it won't be next year for existing claimants) if you aren't earning enough you will be subject to conditionality which is basically the same as someone who is unemployed in which you have to prove you are looking for work or expanding the business.

2- No you pay tax on your actual profit.

3 - No

earthbound_misfit

When conditionality comes in, will it affect all UC payments, including the new WTC equivalent? Or would I be entitled to that element, unconditionally, for doing 35 hrs as long as I wasn't getting any UC payments for housing etc?

Icequeen99

earthbound_misfit wrote: »

When conditionality comes in, will it affect all UC payments, including the new WTC equivalent? Or would I be entitled to that element, unconditionally, for doing 35 hrs as long as I wasn't getting any UC payments for housing etc?

Under UC conditionality is based on earnings not hours worked. If you are self-employed, in 'gainful self-employment' and in the 'all work group' then you will either have to earn the minimum income floor amount and have no conditionality or choose to have UC based on your actual self-employed income (which may be Nil) but be subject to full conditionality.

It has not yet been decided how the MIF will be set. The original white paper said NMW x 35 hrs, but the debates during the passage of the Welfare Reform Act talked about setting it a level similar to an employed person in similar circumstances.

IQ

sammyjammy

HappyMJ wrote: »

1 - Not for a long time yet. Just declare your actual profit and claim tax credits, HB and CTB on your actual profit. Eventually (and it won't be next year for existing claimants) if you aren't earning enough you will be subject to conditionality which is basically the same as someone who is unemployed in which you have to prove you are looking for work or expanding the business.

2- No you pay tax on your actual profit.

3 - No

If OP moves over from ESA to running their business after October 2013 they would come under UC conditionality immediately due to the change of circumstance.

no-oneknowsme

What I dont understand about UC is how business expenses will work.

Eg: My Husband DOES work self employed for 30 odd hours per week HOWEVER , he has a lot of expenses involved in doing his job (taxi driver so the expenses of fuel , depot rent etc are all unavoidable ). Does anyone have any idea if the 35hrs x minimum wage UC will work on will be before or AFTER the expenses?

I havent worded this very well so I hope people know what Im getting at.

Icequeen99

no-oneknowsme wrote: »

What I dont understand about UC is how business expenses will work.

Eg: My Husband DOES work self employed for 30 odd hours per week HOWEVER , he has a lot of expenses involved in doing his job (taxi driver so the expenses of fuel , depot rent etc are all unavoidable ). Does anyone have any idea if the 35hrs x minimum wage UC will work on will be before or AFTER the expenses?

I havent worded this very well so I hope people know what Im getting at.

It is after expenses (net profit), but the problem is it is monthly assessment periods. So say, just as an example, your husband has an insurance premium for his taxi that he pays one a year. In that month that he pays it, it will say reduce his income to nil (or might create a loss which won't be recognised). But the minimum income floor will kick in to treat him as if he has some income. He would therefore be better off paying monthly to spread it across the year in some cases. It will be complicated and a minefield. The way to avoid the MIF is to opt for conditionality but who knows how that will work in practice.

IQ

Pedent

Icequeen99 wrote: »

It is after expenses (net profit), but the problem is it is monthly assessment periods. So say, just as an example, your husband has an insurance premium for his taxi that he pays one a year...

Or an income tax bill. A self-employed claimant earning £15k/year (gross) will make £1250/month (gross), and be liable for something like £2.2k/year in income tax and national insurance, billed in two installments of £1.1k each. For each of the two months of the year when they have tax bills, they'll make £150 (net), but be treated as if they made £940 (gross), losing them something like £500 in withdrawn Universal Credit. So the combination of UC's monthly accounting period and self-assessment's biannual billing will leave them £1k/year worse off than if their tax bill were spread evenly throughout the year.*

Or have I misunderstood how self-employed claimants will be expected to calculate their monthly net income?

(* All figures are rough; it's the principle I'm trying to illustrate.)

earthbound_misfit

Icequeen99 wrote: »

If you are self-employed, in 'gainful self-employment' and in the 'all work group' then you will either have to earn the minimum income floor amount and have no conditionality or choose to have UC based on your actual self-employed income (which may be Nil) but be subject to full conditionality.

So, it is possible to accept the minimum income floor, and receive some UC (equivalent of WTC now) without conditionality? I was worried that even if you did earn min. wage/accept the minimum income floor, you'd get hassled until you had an income above the earnings threshold for UC (ie. threshold at which WTC is removed now).

Icequeen99 wrote: »

It has not yet been decided how the MIF will be set. The original white paper said NMW x 35 hrs, but the debates during the passage of the Welfare Reform Act talked about setting it a level similar to an employed person in similar circumstances.

Hmm will look that up. Does 'similar circumstances' mean family circumstances, or a similar job field?
Wonder if disability is taken into account too.... hm, if I was employed in 'similar circumsatances' health-wise, I'd probably be fired, thus my income would be nothing. Doubt the DWP will use this calculation though! :rotfl:

Icequeen99 wrote: »

Under UC conditionality is based on earnings not hours worked.

What a cruel and fundamental flaw in UC! Sure, working 16/24 hours when you could do more is a bit of a loophole that needs closing, but how far will this go?! Will someone working full time on min. wage with a family to support will be hounded to find a better paid job? Or will it only work for those not working full-time? Will people be forced to work longer than full time (including disabled now apparently 'fit for work') just because their job doesn't pay a living wage? (Damn Labour inventing tax credits instead of looking at wages/wealth distribution!)
And this from the people at the other end of the scale who get paid well + large expenses for doing little of any value to society!

All the bile about claimants being lazy/not wanting to work has paved the way for hardworking people to get punished for not earning enough! Surely people working on low wages are the 'hardworking families' and 'inspirational disabled people' that were being applauded a few months ago?...
At this rate I give it a year, max. two, until they suggest workhouses. (They'll be called "working hostels" or something similar, intially aimed at young people who will no longer be entitled to housing payments...)

Sorry for the random rant, but woke up early and terrified today about the future. I have GOT to figure a way to make a living around my health problems, or I'm toast, and it would be by my own hand. Depression seems like a cruel joke; it's very nature means you are low in skills/energy needed to struggle on.

Icequeen99

Pedent wrote: »

Or an income tax bill. A self-employed claimant earning £15k/year (gross) will make £1250/month (gross), and be liable for something like £2.2k/year in income tax and national insurance, billed in two installments of £1.1k each. For each of the two months of the year when they have tax bills, they'll make £150 (net), but be treated as if they made £940 (gross), losing them something like £500 in withdrawn Universal Credit. So the combination of UC's monthly accounting period and self-assessment's biannual billing will leave them £1k/year worse off than if their tax bill were spread evenly throughout the year.*

Or have I misunderstood how self-employed claimants will be expected to calculate their monthly net income?

(* All figures are rough; it's the principle I'm trying to illustrate.)

Yes that's right. I used the insurance example because it was an expense which is what the other poster asked about. But same applies to tax and NI.

During the bill debates, the Minister said that people could opt for conditionality which is what you would need to do in those months presumably.

IQ

Icequeen99

earthbound_misfit wrote: »

So, it is possible to accept the minimum income floor, and receive some UC (equivalent of WTC now) without conditionality? I was worried that even if you did earn min. wage/accept the minimum income floor, you'd get hassled until you had an income above the earnings threshold for UC (ie. threshold at which WTC is removed now).


Hmm will look that up. Does 'similar circumstances' mean family circumstances, or a similar job field?
Wonder if disability is taken into account too.... hm, if I was employed in 'similar circumsatances' health-wise, I'd probably be fired, thus my income would be nothing. Doubt the DWP will use this calculation though! :rotfl:


What a cruel and fundamental flaw in UC! Sure, working 16/24 hours when you could do more is a bit of a loophole that needs closing, but how far will this go?! Will someone working full time on min. wage with a family to support will be hounded to find a better paid job? Or will it only work for those not working full-time? Will people be forced to work longer than full time (including disabled now apparently 'fit for work') just because their job doesn't pay a living wage? (Damn Labour inventing tax credits instead of looking at wages/wealth distribution!)
And this from the people at the other end of the scale who get paid well + large expenses for doing little of any value to society!

All the bile about claimants being lazy/not wanting to work has paved the way for hardworking people to get punished for not earning enough! Surely people working on low wages are the 'hardworking families' and 'inspirational disabled people' that were being applauded a few months ago?...
At this rate I give it a year, max. two, until they suggest workhouses. (They'll be called "working hostels" or something similar, intially aimed at young people who will no longer be entitled to housing payments...)

Sorry for the random rant, but woke up early and terrified today about the future. I have GOT to figure a way to make a living around my health problems, or I'm toast, and it would be by my own hand. Depression seems like a cruel joke; it's very nature means you are low in skills/energy needed to struggle on.

The MIF will only apply to those in the all work group. If you have a disability, you may not be in the group in which case the MIF wouldn't apply and you wouldn't be subject to full conditionality (although maybe some conditionality depending on the circumstances).

IQ