Universal credit when both employed and self employed.

[littlebopeepp234]

Please can someone help me with this as I cannot seem to find a straight answer.

I am a single parent and have just had to apply for universal credit as I got the letter notifying me that my tax credits are due to end.

I have 2 school age children and I work 10 hours a week on an employed basis and then I also do freelance work on an ad-hoc basis.

I have received a message stating that I have to go for a meeting at the job centre and bring proof of both my employment and self employment.

What I cannot understand is:

It seems I will get a standard monthly allowance and then an allowance for each child.

I keep reading that as a single parent I will need time work 30 hours. I also keep reading that it doesn’t matter how many hours I work as it’s the salary that counts and not the hours - so which one is it? My self employment is freelance work and is very spontaneous and ad-hoc so some months I do well, some months I don’t do so well so how does this work? Will I be pushed to find more work for months I don’t do so well?

And I keep reading about a minimum floor’ and whether or not I will be classed as gainfully self employed or not. I don’t know how this works when I am doing both employed and self employed work?

Also- I keep reading about universal credit being deducted depending on your work circumstances- do they deduct this from your standard amount and the amount you receive per child? Or is it deducted from other elements of universal credit they pay out? I cannot find a straight answer

I would like to know this too.
Anyone?

Universal Credit is made up of elements which are added together to make your total award amount. Yours will be made up of the standard allowance, 2 x child allowance and anything else that applies (housing, childcare etc.) You can see all the elements here: https://www.gov.uk/universal-credit/what-youll-get

It is paid monthly and your circumstances are assessed each month (known as the assessment period) to determine how much you will receive.

You have a Work Allowance, which is the amount you can earn without your Universal Credit being reduced.

• If you get help with housing costs through Universal Credit, your Work Allowance is £379 per month.
• If you do not get help with housing costs through Universal Credit, your Work Allowance is £631 per month.

https://www.understandinguniversalcredit.gov.uk/new-to-universal-credit/universal-credit-and-work/

Each assessment period, your income (both employed and self-employed) will be counted and your UC award will be reduced by 55p for every £1 earned over the Work Allowance.

For example, if you have a Work Allowance of £631 and your income that month was £1000, your UC award would be reduced by £202.95 (£1000 income - £631 allowance = £369. 55p per £1 reduction = £202.95).

You have an Administrative Earnings Threshold (AET) which is £677 per assessment period for an individual. If you earn less than £677 per assessment period, you will be expected to look for more hours or a better paid job. Your self employed earnings will not count towards the AET.
https://www.gov.uk/guidance/universal-credit-and-earnings#earnings-and-your-responsibilities

There is also a Conditionality Earnings Threshold (CET) which is based on the number of hours you can reasonably be expected to work or do work-related activities. It is based on your circumstances. If your earnings are between the AET and your CET, you do not need to have regular meetings with your work coach but you can choose to do so if you think it would be helpful. If you earn above your CET, you will not have regular meetings with a work coach.

You are only 'gainfully self employed' if you meet specific criteria, including that self employment is your main income https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide/universal-credit-and-self-employment-quick-guide#self-employed  It doesn't sound like this is the case for you.

Hope this helps!

Thank you so much for the information. That was a massive help.

Can I just ask - basically I have 2 jobs, one is employed and the other is self employed. If what I’ve just read is right, the AET threshold at £677 means that no matter how many hours I do or how much I earn from self employment, I would still need to look for a higher paid employed job? As the AET does not include self employed earnings? If that’s correct I find that hard as I can work up to 12 hours a day as self employed

I moved across to UC in December, I am employed for 25hrs a week but average 30hrs a week due to overtime. I am also self employed and work 12 hrs a month. UC did a phone call interview as they wanted to ascertain if my self employed work would increase and become my main source of income, its not. When you apply for UC, that is when your payment month starts. I applied on the 7th, so on the 6th of each month I have to log in and report my self employed income and then accept my commitments, they then add this amount to my employed earnings and calculate my payment from this. Each month my payment is different because of my overtime and self employed earnings. To be honest I was dreading the move but it's actually been straight forward.

Hi OP

I was in your position until recently. It's actually a great place to be in. To avoid having the minimum income floor applied, you need to earn the AET from your employed job and never let your self employed income average more than your employed income. The AET is currently £677 a month, so provided you earn more than that in net pay from your employment a month, and less then your employment in your self employment, they will leave you alone.

The problem is my self employment is up and down every month as I freelance so it’s not set hours or set pay. So some months I’m working up to 12 hours a day self employed and earn way more than my employment wage in a month and some months I hardly earn anything as self employed and earn more with my employed wage.

From what I’ve been reading I would probably be in a better position having the minimum income floor applied than having to adhere to the AET.

You wouldn't be in a better position with the MIF because they will set it at 30 x minimum wage a week and assume you make that much whether you have or not, plus deduct an amount for your employed income too! Whereas if you are not GSE, the deductions will be based on what you have actually earned that month.

Would they deduct it from the ‘work allowance’ or from the child payments and standard payment that they will be paying to me? I cannot find a straight answer to this.
From what I have read I will receive a standard monthly amount plus a payment for each child. Will I still receive those payments if the minimum income floor is applied?

No individual element of UC is protected from the MIF.

For example

Your maximum award of UC is £2000 a month, this includes childcare.

Your MIF is set at £1256 a month.

This means you will receive a maximum of £1542 a month regardless of what you earn. If you earn less, it will not increase, and if you earn more, more will be deducted.

as others have said you Can work as many hours as you want, its about how much you earn. You DO NOT want to be classed as gainfully self-employed because the minimum floor will always be applied regardless of how much you actually make. You'll be out of pocket during the months when you don't earn much through freelancing

Your universal credit award is one single monthly payment which is made up of whatever elements you are entitled to (standard element, child element, housing element etc.).

The work allowance is the amount you are allowed to earn before anything is deducted from your universal credit payment.

If you are gainfully self employed, you are assumed to have earned 30 hours x minimum wage = £312.60 per week, which is around £1352 per month.

Your universal credit calculation ignores the first £631 of your earnings (your work allowance) then reduces by 55p per £1 earned after that. So your award would be reduced by (£1352-£631) * 0.55 = £396.55 per month.

This is the case even if you earn LESS that month - so if you have a bad month and only earn £500 instead of £1352, you will still be assumed to have earned the full minimum income floor of £1352 and your award is reduced accordingly.

And as others have said, no element of your award is protected - it's one single monthly payment and it will reduce to zero if your earnings are high enough to cancel it out.

Sorry if I sound really daft and it’s this I am struggling to get my head around no matter how many times I read through it. You are all so patient with me and I feel so stupid!

I have 2 x children and work between 10-12 hours per week employed plus also a self employed job which is freelance and ad- hoc. What I have calculated is that with my one single payment I will get a monthly standard payment of £368.74 per month + child 1 at a rate of £315 per month and child 2 at a rate of £269.58 per month + my employed earnings and then my freelance earnings. So if the minimum income floor is applied, apart from the £631 allowance, they can reduce the above payments I am entitled to on universal credit to almost nothing based on assuming I’m earning a full time wage every month?

I do understand this and I am prepared for the odd month of my UC being cancelled out if I do well with my income.

I don’t pay for childcare so will not be claiming that element of UC. All I will be claiming is the 2 standard child payments. Child 1 at £315 and child 2 at £269.58 plus I believe (according to what I have read online) a standard amount of £368.74 for being a single person over 25.

It’s the minimum income floor that worries me and how it will affect the above payments - my tax credits were a steady amount every month - again no childcare element, just the standard amount for 2 x children and payments were changed accordingly in April every year depending on my earnings for that tax year. From what I’m reading, these payments will go up and down every month on UC depending on my earnings or minimum income floor if I’m deemed gainfully self employed.

You are right that your payments will go up and down each month if your income changes - the idea is that reassessing monthly helps you avoid a big over or underpayment (compared to only assessing once per year).

It's difficult to give you any more detailed information without knowing your earnings, and I don't suggest you post that on here obviously! So I'd suggest having a look at the online benefit calculators - see https://www.gov.uk/benefits-calculators

You can try different figures for employment/self employment and get more of an idea of how it will affect your award.

Thank you for the link. I have tried the calculators but keep getting different answers on each calculator.

If my calculations are correct I would probably get roughly the same amount of UC as I have been getting from tax credits if the minimum income floor is applied.

The only calculator that is correct is UC essentials, the rest are way out.

If your employed and self employed will they combine both incomes to reach the minimum £892 threshold