Universal Credit's critics hope Hammond helps freelancers
Warnings as far back as 2012 about the Universal Credit (UC) system’s unfair treatment of self-employed people appear to have finally got through to the government.
In fact, ministers are now “expectant” that Autumn Budget will announce a climbdown on the roll-out of universal credit, The Sunday Telegraph reported, mainly because of its adverse impact on freelancers.
Highlighted in a report sent to government, the issues at play are so significant that people could be discouraged from beginning self-employment due to how worse-off, financially they would be.
And existing claimants who are already self-employed may be forced to quit freelance work altogether if changes to UC are not made, warns the Low Incomes Tax Reform Group, the report’s authors.
“The system does not work well for self-employed claimants who have fluctuating income and/or expenses, or who have a large, one-off business expense in a particular month, nor does it give people long enough to establish and grow their business,” the group said.
Expanding on what it calls “the most concerning” aspect, the LITRG says it is the minimum income floor (a claimant’s expected monthly income after tax and NI) which fails to account for the fluctuations or the large, one-off expense.
“This can lead to a situation where a self-employed claimant with fluctuating earnings can receive substantially less universal credit than an employed claimant earning a similar annual income above the level of the current minimum income floor.
“We cannot believe that is an intended consequence,” the group said. “From April 2018, the universal credit system will become far more complicated with the introduction of surplus earnings rules for both the self-employed and employed and in some cases this will make the disparity worse.”
One calculation by LITRG shows that a self-employed person could end up as much as £2,600 worse-off than a full-time employed person, even where both individuals earn the same amount across a 12-month period.
the details of the remedy that chancellor Philip Hammond is anticipated to
unveil on Wednesday are being kept under wraps, it will reportedly relate to the
six-week initial waiting period before pay-outs are made.