Universal Credit rules are changing this month – and your payments could reduce

Universal Credit rules are changing this month – and your payments could reduce

11/02/2020

Universal Credit has been vital for millions of Brits this year as the pandemic sparked a financial crisis.

But now nearly half a million self-employed Brits face a cut to their payments.

The government introduced special measures at the start of the pandemic to ensure workers were not penalised for losing income during lockdown.

Rishi Sunak said in March that he would be temporarily suspended the Minimum Income Floor which is used to calculate workers' UC payment.

The minimum income floor was suspended for eight months but usually works around what the government expects self-employed people to earn each month, rather than their actual earnings.

Earnings vary from person to person and not every worker has the same amount of hours.

So the last few months have enabled claimants to have payments based on actual earnings – but that is about to change.

However, with the rule change there are potential problems which could see many claimants lose money, especially if they earn below the floor.

The Chancellor’s suspension of the minimum income floor ends on November 13, potentially affecting half a million workers.

Speaking about the MIF in the Commons, secretary of state for work and pensions Thérèse Coffey said last week: "That policy is still under review. Clearly, this is a matter of discussion, because the regulations do come to an end."

Assessments from the government could assume a person earns the higher minimum income floor, which could see Universal Credit reduced.

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Not everybody will be affected however, and claimants are encouraged to check with Citizens Advice to see whether the rule applies to them.

Those who have been self-employed for less than 12 months have a grace period known as the ’start-up’, meaning the minimum income floor will not be used.

TV money guru Martin Lewis has urged people to write to their MPs to call for the MIF suspension to be extended.

The cash-saving expert tweeted: “On November 13, there's a huge sinkhole awaiting many self-employed as @RishiSunak's Covid suspension of the Universal Credit (UC) minimum income floor ends.

  • Universal Credit list of reasons you may be sanctioned – and your payments stopped

"Ie, self-employed will be assumed to have earnings for UC calculation even if they don't. I'd suggest self-employed contact their MP asap. Please share."

Around 450,000 self-employed workers are affected by the MIF, according to research published by the Institute for Fiscal Studies (IFS) this month.

The think tank has previously estimated that Brits lose an average of £3,200 a year due to the calculations.

MIF is based on average annual earnings rather than actual monthly income.

It's worked out by multiplying the national minimum wage for your age group with the number of hours you are expected to work, minus any tax or national insurance payments.

The minimum income floor is the equivalent of someone working full time at 35 hours per week, on the National Minimum Wage for their age group.

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