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Self-employment and minimum income floor

Self-employment and minimum income floor

Please note: The minimum income floor is not currently being applied to Universal Credit awards due to the coronavirus pandemic and will not return until August 2021. We will update this guide when it is re-established.

Universal Credit - Minimum income floor

For Universal Credit, if you are self-employed and your earned income is lower than your minimum income floor (MIF), the MIF will be used instead of your actual earnings when calculating your Universal Credit award, less an amount to reflect income tax and national insurance. This only applies if you are in the 'all work related requirements' group.

You should make sure the earnings entered in the calculator are at least the level of the MIF or your Universal Credit estimate may be too high.

Until 23 September 2020 the minimum income floor does not apply if you have been self-employed for less than a year, to allow for lower earnings during your 'start up' period. Your universal credit award will therefore be based on your actual net profits.

From this date onwards all new Universal Credit claimants who are self-employed will get a 12 month grace period before the minimum income floor rules apply. This is unless they have already had a grace period for their current trade, profession or vocation on a current or previous award of universal credit in the last five years.

How much is the Minimum income floor

If you are single, your minimum income floor is your individual earnings threshold, which in most cases will be the appropriate national minimum/living wage rate for your age multiplied by 35 hours – though the hours may be reduced in some circumstances due to caring responsibilities or health issues.

The national minimum/living wage rates are shown below:

Year 25+ 21-24 18-20 Under 18 Apprentice
2021/22 £8.91 £8.36 £6.56 £4.62 £4.30

If you are in a couple and your earnings are below your minimum income floor a different process takes place to work out what earnings amount to use in your Universal Credit calculation.

Both members of the couple will have their MIF worked out separately using the method described above and then added together to provide a combined minimum income floor, even if one member of the couple is not self-employed.

Your individual earnings from self-employment and/or employment will be added together to provide a combined earnings figure for you as a couple, to compare against your combined minimum income floor. This is to check that between you as a couple, you are earning at least the combined MIF.

If your combined earnings are less than your combined MIF, then the self-employed earnings will be replaced in the calculation with the individual MIF for that member of the couple (or the amount needed to bring the combined earnings in line with the combined MIF, if this is less).

This is a complicated part of the Universal Credit calculation and you should seek advice if you are earning below your Minimum Income Floor.

Council Tax Support - Minimum Income Floor

Some Local Authorities have also introduced a Minimum Income Floor for self-employed claimants as part of their Council Tax Support/Reduction schemes. The way this works tends to be similar to how described for Universal Credit above but some things such as the number of hours used to calculate your earnings threshold and the length of the grace period can vary from scheme to scheme so it is always best to check with your own Local Authority to see how the MIF might affect your entitlement if you are self-employed and on a low income.