Universal Credit and the self-employed

A new Universal Credit (UC) benefits system will be introduced in the UK this year:

– The Greater Manchester and Cheshire regions from April 2013,
– All new claimants from October 2013,
– All existing claimants will be transferred to the new system on a phased approach to be completed in 2017.

Universal Credit will be paid into a claimant’s designated bank account on a monthly basis. Claimants will manage their claims online and will be required to disclose any monthly earnings.

But what if you are self-employed?

It is common for new businesses to be run on a loss making basis in the early years and many businesses are badly affected by the current downturn in economic activity. The Department of Work and Pensions (DWP), who are responsible for managing UC, will apparently require claimants to declare their current earnings, online, each month. The self-employed will need to report the number of hours they work in their business and this will be valued at the National Minimum Wage (NMW) rate. If the actual profits of their business are higher, the higher amount will need to be declared.

Hopefully, the DWP will reconsider these monthly reporting obligations for the self-employed, for two reasons:

1. Setting a minimum income for the self-employed (hours times the NMW) means that benefits may be reduced even though actual earnings may be lower, and
2. How many small businesses are going to be able to cope with the need to produce monthly accounts?

It will be interesting to see how the final regulations are drafted…