A change in the way the universal self-employed credit is calculated is to remain in place, the government announced today.
The minimum income limit was suspended during the coronavirus pandemic.
That six-month policy suspension was supposed to end on November 13 – as part of a series of changes that work to the advantage – but will now continue through 2021.
This is good news for the self-employed, whose universal credit continues to be calculated from their actual income rather than assumed income.
The minimum wage floor is based on the information from the DWP that an employee would receive in similar circumstances. It is based on full-time employment of 35 hours per week for the national minimum wage minus estimated taxes and national insurance.
The problem has always been that the MIF has been resolved despite the fact that the self-employed have actually increased and decreased incomes. In a few months, a person earns far less than the MIF but receives the same amount of UC.
The Institute of Fiscal Studies found that for 450,000 low-income households, this policy cuts payments by an average of £ 3,200 per year.
Chancellor Rishi Sunak dropped this rule during the pandemic to allow self-employed people to get a universal loan based on their actual income, which can be far less than usual due to the effects of coronavirus and lockdown.
As the founder of the Money Saving Expert website, Martin Lewis, recently warned, the suspension of the MIF should expire on November 13th.
However, the suspension will continue until the end of the financial year.
Therese Coffey, Secretary of State for Labor and Pensions, said today: “After carefully considering the current public health situation and the national work environment, the current easing of the suspension of the minimum income floor for universal loans was due to the date that will expire on November 12, 2020 extended until the end of April 2021.
“Regulations will be enacted and enacted before November 12, 2020.”
The news was welcomed by community organizations whose work is to help people with financial problems such as benefit availability.
Alistair Cromwell, Acting General Manager of Citizens Advice, said: “We are delighted that the government has taken this sensible approach and listened to the concerns we expressed.
“Many self-employed have viable businesses but face persistent trade restrictions.
“Given the greater uncertainty over the coming months, it is only right to continue this support and avoid long-term damage to livelihoods and the economy.”
He added, “We now urge the government to build on this by reassuring applicants that their universal loan or labor tax credit will not be cut by £ 20 a week in the spring.”
That £ 20 is the temporary increase in universal loan payments that was introduced in April for a period of one year.
That extra surge, on top of a surge in inflation at the end of the benefits freeze, should help people during the coronavirus crisis. It was £ 1,040 per year on top of the standard universal credit allowance – that is just under £ 90 per month with the usual monthly payment.
A similar coronavirus surge was seen for those with working tax credits, with the basic item increasing by £ 1,045 per year.
However, the boost is only in effect for one year and is expected to end in April 2021.
Helen Barnard, Acting Director of the Joseph Rowntree Foundation, warned: “Despite this surge, many families have struggled to cut essentials and run up debt in recent months, but this lifeline has allowed them to keep their heads above water and helped prevent a rise in poverty.
“People already living in poverty and struggling to stay afloat will face severe difficulties. Half a million people are more likely to be plunged into deep poverty (more than 50 percent below the poverty line).”
She added, “We need to maintain this lifeline for people with universal credit and labor tax credits. But we also need to see it benefit people with legacy benefits who have previously suffered from the same rough waves with no reinforcement lifeline.
“Currently, the additional £ 20 per week does not go to those receiving legacy benefits such as Employment and Support Allowance, Unemployment Benefit and Income Support. The majority of those receiving these benefits are sick or disabled and carers who – for for a long time – were unfairly at much greater risk of poverty and were most at risk during the COVID-19 pandemic.
“By extending this lifeline to include those of us on legacy benefits, the government can increase the incomes of 1.5 million people, including 300,000 children in some of the most vulnerable families.
“As we are feeling the impact of the pandemic on jobs and incomes, it is clear that we cannot afford to cut this lifeline at the precise time that unemployment is rising, and many of us are at increasing risk of poverty. “