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Minimum Income Floor

Due to COVID-19, the Minimum Income Floor is suspended until end of July 2021. There has been an update given by DWP.

The Minimum Income Floor,
gainfully self employment test and start-up periods are being reintroduced when existing regulations expire on 31 July.

To ensure everyone has time to prepare, DWP have said everyone will be given a month’s notice if the Minimum Income Floor is being applied and no one will see a decrease in their universal credit award before September. If your self employment continues to be heavily impacted by covid-19 restrictions, work coaches will be able to provide a suspension of the Minimum Income Floor for up to two months at a time on a case-by-case basis, for a maximum of three suspensions, adding up to six months in total.

If you have not yet been found gainfully self-employed, you may benefit from a one-year start-up period.

 

Anyone who was in a start-up period when the easement came into effect in March 2020 will also not have the Minimum Income Floor applied for the balance remaining on their start-up period when the regulations where introduced in March 2020.

What is the Minimum Income Floor?

 

The minimum income floor was introduced in 2018 and only applies to Universal Credit. Put simply, it is an assumed level of earnings, if you do not earn as much as could be expected. It only applies to be people who are gainfully self employed.

You cannot be considered as gainfully SE if you are:

  • Lead parent to a child under 3 years old

  • Have been awarded Carer’s element

  • Have Limited Capability to Work (with or without Related Activities)

  • Lead Foster Carer

  • Pregnant women during the period spanning 11 weeks before and 15 weeks after the expected week of childbirth

  • Over State Pension age

If you do not fall under one of the above exceptions, you will be asked to take part in a gainful self employment test to decide if you are gainfully self employed.

 

The expected level of earnings

Universal Credit have an expectation of what a person should earn. This amount is based on the amount of hours per week you are available for work being paid at National Living Wage, if 23 or over - National Minimum Wage for your age, if under 23.


If you have no restrictions on how much you can work, you will be assumed to earn the equivalent of 35 hours a week


The number of hours expected is set by your work coach at the Jobcentre considering your health, responsibilities, and other commitments. When discussing your situation with a Work Coach, be clear about any circumstances that may limit your earnings.

The amount set should be made clear to you and should allow for deduction of income tax, National Insurance. 

Start up period

If you are found to be gainfully self employed, you will be entitled to a 12 month start up period. During 12 month start up period:

  • The Minimum Income Floor will not be applied. This period is intended to give you support to increase your earnings to the expected level.

  • You will not be asked to seek alternative employment.

  • You will be assigned tasks to complete that could help grow your earnings.

  • You will be expected to take part in 3 monthly reviews with a work coach. 

If you fail to take part in mandatory appointments or complete the tasks you have been assigned, your start up period can be ended and the Minimum Income Floor will be applied from that point.

Applying the Minimum Income Floor

If you take home pay figure (income minus permitted expenses) is more than your Minimum Income Floor amount, UC will use your take home pay figure to calculate your deduction for take home pay on your statement.

If you are gainfully self employed, not in 12 month start up period and your take home pay figure (Income minus permitted expenses) is less than your Minimum Income Floor amount,  UC will use the Minimum Income Floor amount to calculate your deduction for take home pay on your statement.

This will mean that your UC payment is not reflective of how much take home pay you have and could leave you in hardship. You would be more financially worse off than someone who had the same take home pay from regular employment. It is important to know that if you are subject to the benefit cap and earn less than £617 in actual take home pay, the assumed level of Minimum Income Floor being applied, does not remove the benefit cap. You can have the Minimum Income Floor and the benefit cap applied at same time.

NOTES:

If you earn from self employment and PAYE, your wages will be combined before the Minimum Income Floor is applied.

If your partner earns above their expected level of earnings (CET), anything they earn over and above can be used towards your Minimum Income Floor.