Self-employed workers are £600 worse off a year under Universal Credit, Citizens Advice claims

3 Credit Reports

UNIVERSAL Credit could leave self-employed workers worse-off to the tune of £630 a year, a charity has warned.

Two major new reports by Citizens Advice released today claim that those who work for themselves could receive far less than employees earning the same amount.

The roll-out of the Universal Credit across the UK has been blighted with problems, with families having to wait weeks to get their first first payments, leaving them struggling to make ends meet.

And now the charity has highlighted potential problems with something called the “minimum income floor”, which assumes that everyone who has been self-employed for more than a year and is claiming the benefit is earning the National Minimum Wage.

But Citizens Advice is worried that even though many self-employed people’s pay fluctuates from one month to the next, Universal Credit won’t make up the difference with a larger payment to cover any potential shortfalls in income.

According to the charity, a self-employed seasonal worker who earned £9,750 a year but made most of their money in the summer months would be £630 worse off under Universal Credit than an employee with exactly the same circumstances.

The charity says this design flaw is unfair and risks causing financial hardship as self-employed workers often earn different amounts from one month to the next.

It has dealt with one family that has had to rely on a food bank as a result of having less money because of the income floor, with the father forced to give up work altogether and the mother cutting short her maternity leave to go back to work in order to boost their benefit payments.

Gillian Guy, chief executive of Citizens Advice, said: “Despite the labour market changing significantly in the last decade, including a rapid rise in self-employment, Universal Credit is still better suited to those with regular jobs.

“The Government has shown it is prepared to act to improve Universal Credit as new facts come to light – an approach we strongly support.

“It now needs to look again at the design of the benefit to ensure self-employed and agency workers aren’t left at a financial disadvantage.”

The second report found that employees could also be at risk of financial insecurity when they move to Universal Credit.

One of the largest of a series of cuts to Universal Credit announced in 2015 was to the work allowance, reducing the number of hours people can work before their Universal Credit payment starts to decrease.

The charity asked 877 people receiving in-work benefits how they would cope with a £100 drop in their monthly income, roughly the average amount affected households stand to lose from the reduced work allowance.