Self-employed welcome recommendations for changes to Universal Credit

(3 minutes to read)

With experts such as LITRG and IPSE calling for changes to Universal Credit, the government has made recommendations on how UC could better support the UK’s self-employed

The Low Incomes Tax Reform Group (LITRG) and the Association of Independent Professionals and the Self-Employed (IPSE) welcome the results from a new report released by the Commons Work and Pensions Committee.

The ‘Universal Credit: supporting self-employment’ report makes a number of recommendations on how UC could better support self-employed claimants, including calling for greater flexibility in income reporting periods and for better alignment with the tax system.

LITRG has been raising some serious concerns with both parliament and government about the treatment of self-employed claimants under UC since 2010.

The rules penalise those who have fluctuating incomes and those who have big business expenses that fall in any one month rather than being spread over the year. This is something which the Committee recognise as a normal part of self-employment and rightly point out is far from a reliable indicator of the viability of a business.

Robin Williamson, LITRG Technical Director, commented, “Existing universal credit rules very clearly do not work for most self-employed people, penalising those who have fluctuating incomes and expenses. The Government should heed the Work and Pensions Committee’s sensible recommendations, as well as those in LITRG’s earlier report, which would at least go some way towards improving the situation.

“The Committee’s recommendations, which echo some previous suggestions made by LITRG, would also allow for a better balance between supporting entrepreneurship and protecting the public purse, as well as bringing greater parity between the employed and self-employed in the system.

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“We particularly welcome the Committee’s recommendations in relation to the need for flexibility in income reporting period for each business and for better alignment with the tax system. LITRG would go further and encourage the Government to re-define the Minimum Income Floor (MIF) so as to allow for the deduction of pension contributions. There is little justification for permitting the deduction of pension contributions without any limits from earnings when assessing the universal credit of employed earners, but not making a similar adjustment when setting the MIF for self-employed claimants.”

Chris Bryce, IPSE CEO, said, “This report is welcome news for IPSE and all self-employed people. Universal Credit has united businesses, unions and the self-employed in opposition against the way the system treats independent professionals – Universal Credit just doesn’t work for freelancers and the self-employed.

“Monthly income reporting requirements punish self-employed people because they fail to account for the uneven nature of their income – something the report rightly highlighted was an ‘entirely normal feature of self-employment’.

“Why, for example, should a farmer, who sells or produce crops only at a particular time of year, be penalised?

“The system of monthly reporting must be relaxed to ensure the self-employed – who have helped keep unemployment at record lows – receive the support they require.

“Giving self-employed people more time to get their enterprises up and running before the income assessments kick in would be a welcome pro-business move.

“It is truly heartening to see the Work and Pensions Committee not only citing us repeatedly, but also taking up our main recommendations to make this creaking system actually work for the self-employed. Now we hope Government will take heed of what the Committee is telling them and finally use Universal Credit to give vulnerable self-employed people the support they need.”

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