Once you start working, you’re worse off until you earn a LOT

[AmieWhineHouse]

This post isn’t to bash anyone that knows it’s not in their best circumstances to work. I’m aware the vulnerable in society really need help and protections and I’m not against that nor do I begrudge that at all.

I am setting up my own business to begin next year - I am disabled.
My complaints are as follows:

1. I will be charged 55 pence for every £1 over my work allowance - which feels really unfair, it feels like a penalty for working.

2. If I close my claim for Universal Credit to avoid this charge it puts me in a vulnerable position

3. On top of that, my self-employed income would be unpredictable.

4. If I stayed on universal credit I’d keep my rent covered and my free entitlement to things like the dentist and glasses.

5. once deductions have come off including taxes and accounting for services I would no longer be eligible for for free I’d actually be worse off than staying on benefits

Sorry if this is confusing, I have tried to make it as clear as possible. Ultimately, It seems I’d be better off on benefits and working is a risk.

It seems that being able to do some form of work despite disabilities is a bit of a gray area and penalised?

So you want people to get benefits AND wages?

OK - in that case I want everyone who works at all to get NO benefits at all....

You tell me, which is more fair?

No it’s not - it’s an up to 100% tax if you have small children. It’s a 62% tax to EVERYONE, children or not.

in my opinion they shouldn’t be deducting anything at all no one else gets 55% of their earnings deducted
I get over 1k a month benefits + free services but only 411 work allowance
cant earn more without being charged
I want to earn the same as I get in benefits so I can come off them cos I don’t want to pay any charge but don’t know if I can make that leap

That’s incorrect. It applies to a 25k band of earnings for all. If you also have nursery age children you can end up with effective marginal rate of over 100%.

I once received a 20k bonus and ended up worse off than had I not received it because of this tax trap.

Well most people do actually, as by 'deducted' you mean part of your earnings that is going to be taken off your benefits like housing benefit, right? That is the same as most workers. More than half of my salary goes on my rent.
I do get your point that sometimes working doesn't make you financially better off than being on U.C, after you've paid all your rent etc. However, I think it would help you if you reframe it in your mind. Rather than seeing it as them taking your earnings, it just means that your benefits will be reduced so that you will be contributing towards your rent.

This is why working people moan. For some people they would be working many hours a week all month to get over £1K/month (by the time they have paid tax & national insurance. Plus working people don’t get any support with things like dentist, school meals, school trips). I don’t know the answer. Really if you can work you should. Getting over £1K/month for no graft should only really be an option if you’re too unwell to work. Clearly we do need to support those that are in need. However you seem to be well enough to set up your own business, so presumably could work in some capacity for someone else?

Look, I’m saying this as someone on benefits (I care for my disabled DP) who is registered as (ungainfully) self-employed as I have an online store that gets a few sales a month.

You can’t have full benefits and full wages. Benefits are for people that don’t earn enough money to live. The fact that they disregard the first £411 a month is a good thing. Then, once you’ve earned that extra £411 they start swapping UC money for your earned money at 55p per pound - not even the whole lot, until you reach the income level where you’re not entitled anymore. It’s designed so you can gradually replace the benefit money with your own money.

The only thing that you have to look out for is if you earn a massive amount in one month it can mess up your claim for that month and leave you without a payment - that’s a genuine worry and the system needs to be looked at. But you can aim to earn that £400 to start with and build up slowly.

Edited to add - that’s after they’ve taken off expenses too.

You’re not being charged or taxed. You’re being tapered off.

I think this is my problem you’ve described it well I’ll not be any better off working but I’ll also lose what I get for free !

You do realise that what you get for “free” is actually the result of someone else doing work and not being paid for it.

Why should others work and not be paid just to allow you not to work?

I know but I will be working.
it just feels so unfair as I will be significantly worse off working

Like others have said, you can't be on a full time wage and get full benefits too. It did used to be 63p per £1 over the work allowance that was taken off.

You will be just starting out... are you sure you will make enough to affect your benefits from day one? Being LCWRA means you wont have to close your business after a year (or it might be 2) if it does not make a certain amount.

I am on LCWRA too, but have the higher work allowance as I do not rent. I have not made use of it, but if I did I would see it as a way to top up my benefits and have my own money.

I wish you the best of luck with your new venture.

You mean it’s unfair that you have to work for nothing instead of somebody else doing that for you?

You don’t effectively get 45% of take home. You get all of your take home and then less on top

so everyone else should work so you don’t have to? Why is that fair on everyone else?

Actually, you’re wrong. It’s applicable to all on that income band due to the loss of the PA. For people with children, it’s much worse. They lose childcare and personal allowance. Resulting in an effective tax rate over 100%. A person with 2 children will need to earn nearly 150k to take home the same as 99k. Look up the data in the IFS.

Sorry to hear the free money you get isn't up to your high standards

Was there any need for that? Did it make you feel better?

I can understand what OP is on about. Yes, UC is all about being better off if you work, but there is a little window where you can be on UC and earn. But in that little window you have to pay for dentistry, council tax, prescriptions etc and you end up worse off, and not even be on a full time wage to be able to pay for it all.

I imagine OP would want her business to be successful, but on the way there she will be worse off.

I think there is a need to remind people to be grateful, yes.

😳

Welcome to the real world, are you not actually embarrassed saying this?

My health issues aren’t going away just cos I’m working

You aren't going to be worse off. I think you're not doing the sums correctly.

You can earn £411 a month before your UC starts to reduce.

And then, once you've earned £411, your UC reduces by 55p for every extra £1 you earn.

I hate hate hate the UC system and find it unfair and hard to navigate but even so, you won't be worse off for starting to do a bit of work.

@AmieWhineHouse have you had an interview with the Job Centre about this yet? When you declare a change of circumstances in your journal (which you will have to do when you start self employment), it will trigger an appointment with a work coach. Maybe then you can ask them about this, and look at what will be affected when you earn certain amounts, and hopefully put your mind at rest. It might not be as bad as you think;

You’re not being charged anything. Let’s say you get £1,500 UC then earn £1,500. Your UC would then be reduced to 901.05 so you’d have that plus your earnings and end up with £2401 a month. Services like prescriptions stop being free only once you go over a threshold and then it’s less than £10 per item.

How on earth are you going to be worse off working when the first £411 of earnings is completely disregarded ( assuming you get LCW or LCWRA ) and then anything above that reduces your benefits on a taper? I just don't understand how you think you will be worse off. It is actually quite a generous system. I think if self employed and on LCWRA you are not even subject to the minimum income floor.