As a self-employed person do I need to reach a minimum income in order to claim Universal Credit?

ColonelCabbage

I've been self-employed for a long time but 2023 is a horrible year and I'm not making nearly enough money so I want to claim UC. On DWP website, the article entitled "Claiming Universal Credit when you are self-employed" defines "gainfully self-employed" without specifying a minimum income.

I'm confused because in early 2019 I went to an interview to claim either universal credit or working tax credit (can't remember which) and in that interview, I remember distinctly that the guy said I'm not making enough money to apply / make a claim. He explained that if I don't make enough money as a self-employed person then I'm always free to seek regular employment in an attempt to make as much money as I need.

Have rules changed since then? Or did the principle I just mentioned apply only to working tax credit but not to universal credit?

Spoonie_Turtle

I don't know what the person you saw was talking about, for Working Tax Credits there was a requirement to be working enough but you couldn't have made a new claim in 2019 anyway.

For Universal Credit there is a Minimum Income Floor, although it has now changed to apply only once you've been claiming for 12 months (whereas it used to apply straight away if you'd been self-employed for more than 12 months before claiming UC).

You still have to be classed as gainfully self-employed or not in the first 12 months to determine whether you need to look for work or not - unless you are a carer for a disabled person, or have a health condition that limits your ability to work, in which case you won't have to look for work and you can't be treated as gainfully self-employed either.

The Minimum Income Floor after 12 months is a level of earnings they assume you've earned - for most GSE people that's 35xNMW - and if you've earned less than that, they use the assumed level to calculate your UC payment.  If you've earned more, then they use your actual earnings to calculate your UC payment. 

In practice it means they'll only 'top up' your income a limited amount.  The reasoning being that UC is not there to support unsustainable businesses, so if you consistently earn a lot less than the assumed MIF and can't afford to live then you'll have to seek more/other work.  (Not discussing policy, just explaining why the rules are what they are.)

https://www.citizensadvice.org.uk/benefits/universal-credit/on-universal-credit/how-universal-credit-payments-work-if-youre-self-employed/

https://www.gov.uk/self-employment-and-universal-credit

https://www.turn2us.org.uk/get-support/information-for-your-situation/universal-credit-uc-income-and-capital/universal-credit-uc-income-self-employed-earnings

https://www.understandinguniversalcredit.gov.uk/new-to-universal-credit/self-employment/

ColonelCabbage

Thanks a lot!

I have one more question.

Third URL states "The minimum income floor is the equivalent of someone working full time (35 hours per week...) on the National Minimum Wage...".

At £10.42 per hour that's 35 x 10.42 x 52 = £18,964

And yet, on all three benefits calculators recommended on the DWP website (turn2us, betteroffcalculator and entitledto), the estimated amount of universal credit I'm getting at the end is far higher when entering an income of say £8,000 than when entering £18,964, whereas the amount of UC should be the same for these two incomes since they're both <= the minimum income floor.

These calculators are probably creating a lot of confusion out there, or am I missing something?

Spoonie_Turtle

ColonelCabbage said:

Thanks a lot!

I have one more question.

Third URL states "The minimum income floor is the equivalent of someone working full time (35 hours per week...) on the National Minimum Wage...".

At £10.42 per hour that's 35 x 10.42 x 52 = £18,964

And yet, on all three benefits calculators recommended on the DWP website (turn2us, betteroffcalculator and entitledto), the estimated amount of universal credit I'm getting at the end is far higher when entering an income of say £8,000 than when entering £18,964, whereas the amount of UC should be the same for these two incomes since they're both <= the minimum income floor.

These calculators are probably creating a lot of confusion out there, or am I missing something?

I would assume they are not using the MIF at all, just working on the basis that you're wanting to know how much you'd be entitled to if you claimed now/very soon - which would give you 12 months without the MIF in place so for that the calculators are correct.

To know roughly how much you might be entitled to once the MIF does apply, you'd have to put in the earnings at the MIF level.

zedonk

The MIF can also be lower depending on how many hours you're expected to work. I'm a single parent with kids in primary school and am only expected to work 25 hours/week, so my MIF is based on that. 

ColonelCabbage

@Spoonie_Turtle OK now I understand that there's no MIF during the first year of a new claim, which is great. But then why does this also apply to people who, like me, have been self-employed for many years? Weird.

@zedonk good point too. Half of the time I have my child with me who's in secondary - I suppose I'm expected to work 35h per week then no? Any idea where this kind of thing is specified so I can check?

Spoonie_Turtle

ColonelCabbage said:

@Spoonie_Turtle OK now I understand that there's no MIF during the first year of a new claim, which is great. But then why does this also apply to people who, like me, have been self-employed for many years? Weird.

@zedonk good point too. Half of the time I have my child with me who's in secondary - I suppose I'm expected to work 35h per week then no? Any idea where this kind of thing is specified so I can check?

I don't know for sure but I think part of it was because they realised people were having to claim because they'd hit a blip, that they previously had a viable business and just needed support while they got back on their financial feet.  So that 12 months tides them over while they regroup and work out how best to move forwards.  But like I said, I'm not entirely sure of the whole reasoning for the change.  A lot was going on in 2020!

Regarding your expected hours, it's based on the age of your child (or youngest, if you have more than 1).  With a child aged 13 or over it it's 35hrs.  If your child is still 11 or 12, it's 30 hours.
https://www.gov.uk/government/publications/universal-credit-and-your-family-quick-guide/universal-credit-further-information-for-families#in-return-for-your-universal-credit

peteuk

Also remember if you have a significant other living with you then it will be a joint claim and and income they make will be taken into account. 

Your personal circumstances will also dictate the level of gainful employment (as noted above) 

ColonelCabbage

@Spoonie_Turtle wait, in the third link you posted (turn2us) it states "You get a 12 month start up period for the first 12 months of your Universal Credit claim if you started your business less than one year before you started your claim."

But as I said I've been self-employed for many years, so according to that passage I won't have a start up period hence the MIF will apply to me straight away isn't it?

Spoonie_Turtle

ColonelCabbage said:

@Spoonie_Turtle wait, in the third link you posted (turn2us) it states "You get a 12 month start up period for the first 12 months of your Universal Credit claim if you started your business less than one year before you started your claim."

But as I said I've been self-employed for many years, so according to that passage I won't have a start up period hence the MIF will apply to me straight away isn't it?

Then that link is outdated, my apologies (I skim read it to make sure it was accurate and clear, evidently missed that bit).

Try this https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide/universal-credit-and-self-employment-quick-guide#:~:text=A start-up period is,increase your self-employed earnings

You've not claimed UC whilst being self-employed before, so if you are deemed to be gainfully self-employed you will qualify for it.

ColonelCabbage

Thank you @Spoonie_Turtle!

I have another related question but I thought I'd make a new thread for it and I'm thinking you might also know the answer to that question. The thread is in this same forum and it's entitled "Will UC payments immediately increase upon submission of tax return with lower yearly income?".