Self employed after the budget?

dktreesea

rogerblack wrote: »

That's not how it works.
If you're earning less than 35*NMW, you may be required to seek more/better-paying work.
If you are doing 35 hours of SE a week, and earning 16*NMW say you may be treated as if you were earning 35*NMW from the point of view of work-requirements.
But - your UC award will be reduced as much as if you were earning 35*NMW.

As I understood the UC regulations, those who are FT self employed are not subject to any conditionality. Their UC award is based on the higher of their actual profits per month or the NMW * the required working hours for the family.


So say the family has 2 children, aged 16 to 19, so both partners are deemed available to be working full time in their business. Their earnings threshold is:
2 * 35hours * the NMW per week, so *52/12 to get the monthly figure. So £2,032 a month minus something for things like income tax and national insurance.


Say the business only earns £500 a month. The UC is based on the higher MIF income.


You can work out the benefits impact of the MIF, very approximately by using a calculator like entitled to.


In our area, renting a 3 bedroom home , a family with two children aged 16 to 19, with both parents working in the business for a profit of £6k a year would get benefits of around £22k a year, depending on the amount of rent they pay, whether it was under or over the LHA, and their council tax.


Come the introduction of the MIF and UC, that same family, still both working full time at their business for their £6k profit a year but now with deemed income of £1000 a month each, would be entitled to benefits of £7,500 a year.


I've had the impression throughout that the government doesn't care how much you earn as a self employed person. They just want to limit the amount of support you get if you choose to earn less than the FT NMW.

NYM

dktreesea wrote: »

.........I've had the impression throughout that the government doesn't care how much you earn as a self employed person. They just want to limit the amount of support you get if you choose to earn less than the FT NMW.

About time too.

rogerblack

NYM wrote: »

About time too.

You are assuming that everyone can find employment at the NMW.
I have no problem with people choosing to earn less than NMW - as long as that earning was treated as being over earnings/NMW hours.

Making the assumption that everyone is earning the NMW does little positive.

I note that if I was to do small amounts of work self-employed as a disabled person, this would specifically make it difficult for me, as the assumption of minimum income floor means that for every pound I might earn, I could easily have over a pound withdrawn.

I am _not_ arguing that people should be supported highly if they are earning little per hour.

But not supporting them as if they were doing the same amount of hours as NMW is counterproductive, especially for those groups that are not required (for good reason) to seek (more)work if they are not working 35 hours a week.

NYM

I'm not making any assumptions. I responded to the comment that dktreesea wrote '...They just want to limit the amount of support you get if you choose to earn less than the FT NMW.'

I wholeheartedly agree with the Government on this point. I don't believe anyone has the right to choose to earn less than NMW whilst expecting benefits to support that choice

rogerblack

NYM wrote: »

I'm not making any assumptions. I responded to the comment that dktreesea wrote '...They just want to limit the amount of support you get if you choose to earn less than the FT NMW.'

I wholeheartedly agree with the Government on this point. I don't believe anyone has the right to choose to earn less than NMW whilst expecting benefits to support that choice

You are assuming the choice exists.

The MIF does not impact those who 'expect benefits to support that choice'.
(talking of universal credit).
That is perfectly adequately handled by the other mechanisms.

Simply treating hours worked as earnings/NMW would fix all of those issues. (as is already done but for the MIF)
The MIF simply acts to penalise those who for whatever reason can't make the minimum wage - even if they are not required to work.
The lack of it would not make anyone better off, compared to someone working half the hours for the same money.

Universal credit does not work like tax credits in pretty much any way.

dktreesea

rogerblack wrote: »

You are assuming the choice exists.

The MIF does not impact those who 'expect benefits to support that choice'.
(talking of universal credit).
That is perfectly adequately handled by the other mechanisms.

Simply treating hours worked as earnings/NMW would fix all of those issues. (as is already done but for the MIF)
The MIF simply acts to penalise those who for whatever reason can't make the minimum wage - even if they are not required to work.
The lack of it would not make anyone better off, compared to someone working half the hours for the same money.

Universal credit does not work like tax credits in pretty much any way.

But those not required to work aren't subject to the MIF. Disabled people for instance are specifically excluded.


Treating hours worked rather than income earned may work very nicely for the self employed but isn't fair on those who work for the NMW in the working for someone else world. Plenty of self employed people may work full time, but why should other people support them if they are prepared to work for less than they could get if they worked for someone else?


In supporting the current system, I feel like we are defending the indefensible. Should we really have an open ended system, where people can work for as little as they like, all the while working full time, and get generous subsidies for their "business" forever more?

FBaby

Self-employment just isn't an option for everyone, yet tax credits made it so. There are many reasons why it is not applicable for many people, and that's just the way it should be. How many people embarking into self-employment bother to do a business case to assess the viability of it before deciding to go that route? The genuine one do, the others who just want to claim benefits without having to sign up weekly aren't bothered.

dktreesea

FBaby wrote: »

Self-employment just isn't an option for everyone, yet tax credits made it so. There are many reasons why it is not applicable for many people, and that's just the way it should be. How many people embarking into self-employment bother to do a business case to assess the viability of it before deciding to go that route? The genuine one do, the others who just want to claim benefits without having to sign up weekly aren't bothered.

I think that sums it up pretty well. There are plenty of voices just now in the self employed world saying the MIF isn't fair because if someone were only able to get part time work, say 30 hours a week, in the working for someone else world, they would get a full, unconditional top up in benefits. If they have a family then it would be even better, - they would get a full top up even if they were only able to get 24 hours a week paid work.


But that argument doesn't hold water under Universal Credit. If their conditionality said they had to work full time, they would be required to look for more work to top up their hours. The question is would the DWP sanction people who did have part time work, who claimed they couldn't get full time work but whom the DWP considered were not doing enough to get that full time work? Keeping in mind a sanction would then apply to the whole of the benefits received, so tax credits, housing benefit and the like, not just the personal stipend, this could be a political disaster for the government if they did apply sanctions to people only working part time.


To me, the self employed would be accepted as gainfully employed full time, have no conditionality at all, so therefore should accept the MIF in its entirety or give up their businesses and go back to being unemployed with all of the conditionality (if they don't get work) and constraints (if they do) this would imply.

NYM

I work for several small businesses, ..every single one of them started as 'self-employed' but instead of relying of benefits, all of them approached High St banks with sound business plans that convinced those Banks to lend to them. Some of them used their own homes as security for the loans.

It seems that is an old fashioned now....

PasturesNew

The current method means that those "working the system" can seriously undercut the market - and screw it for those genuinely trying to make a proper business from the same idea, but who don't get those top ups.

This means that those who are able to be self-employed in something will find their competition decreases, so their prices can rise, so they can earn a better wage .... rather than "competing" now with people who are "happy" to be earning £1/hour because they know they'll rake in some top ups that they can get.

It'll be the death of the non-business.... good.