Financial expert Martin Lewis has issued a warning to Universal Credit claimants as cuts could see hundreds worse off in a fortnight.
The worry is based on the lesser known “minimum income floor” which affects nearly half a million self-employed people who get Universal credit.
This floor was suspended due to the coronavirus pandemic eight months ago, but will return on November 13.
Martin, the founder of MoneySavingExpert, wrote on Twitter: “On 13 November, there's a huge sink hole awaiting many self-employed as Rishi Sunak's Covid suspension of the Universal Credit minimum income floor ends."
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He continued: "I.e self employed will be assumed to have earnings for Universal Credit calculation even if they don't.
"I'd suggest self-employed contact their MP ASAP”
The minimum income floor was implemented to stop taxpayers from propping up businesses that are making a loss.
Basically, for every £1 of earnings a low-paid worker loses due to a drop in pay they get back 63p via Universal Credit.
However the income floor behaves as though self-employed people earn the mimimim wage no matter what they take home in a month.
As many as 450k households see their payments cut by an average of £3.2k a year due to the policy, claims the Institute of Fiscal Studies.
Martin Lewis suggests that self-employed people who may be affected by the upcoming change should write to their MP.
SWP officials have said that not all self-employed claimants will see their payments change due to the minimum income floor.
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Despite pressure from Martin and Labour, the Government has said only that it is “looking at” the exemption.
Universal Credit director Neil Couling said it will only affect those who are seen as “gainfully self-employed”.
This means those with zero income are “likely” to be spared.
The floor also doesn’t apply during the first twelve months of trading.
See the gov.uk website for more information on the minimum income floor.
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