MINIMUM LEVEL OF EARNINGS
Note: due to the coronavirus pandemic, the DWP suspended (i.e., did not apply) this rule (the ‘minimum income floor’) between 13 March 2020 and 31 July 2021. From August 2021, if it was suspended in your case, it applies again when the DWP decides that you are still in gainful self-employment, or at the end of any remaining ‘start-up period’ (see here) that was still to run when the minimum income floor was suspended in March 2021. If your business is not affected by the pandemic, the minimum income floor now applies as normal. However, until the end of July 2022, if you can show that your business is affected by the pandemic, your work coach can suspend the minimum income floor for up to two months at a time and six months in total.
If your main work is self-employment but your earnings are low, your UC may be assessed on higher earnings than you have. This is called the ‘minimum income floor’ and is generally at the level of the national minimum wage for the number of hours the DWP expects you to work – usually 35 hours a week. This applies if:
- you are in ‘gainful self-employment’ (see here); and
- you are not in a ‘start-up’ period (see here); and
- you would be subject to all work-related requirements were it not for having the minimum income floor applied. (Having the minimum income floor applied means no work-related requirements can be imposed on you.) If you are not subject to any work-related requirements (for a reason other than having the minimum income floor applied), or just subject to work-focused interviews or work preparation, your actual earnings from self-employment are taken into account, however low they are.
If you are single and the minimum income floor applies to you, your earnings are treated as being at the individual earnings threshold in any assessed income period in which your earned income from self-employment, together with any earnings from employment, is below this level. The individual earnings threshold is the same threshold used to decide your work-related requirements (see here), with a notional amount for tax and NI contributions deducted.
Ben has a window cleaning business. He is single. For the current assessment period, he declares earnings of £300. The DWP works out Ben’s minimum income floor to be £1,280 a month (35 hours a week x £9.50 x 52 ÷ 12 rounded down, less £160 for notional tax and NI contributions). Ben’s UC award for the assessment period is worked out on earnings of £1,280.
If you are in a couple and the minimum income floor applies to you, your combined earnings for the UC assessment are usually your partner’s earnings added to the minimum income floor for you. However, you cannot be treated as having combined earnings of more than a certain amount. This amount is the same as the joint earnings threshold for couples used to decide if there are any work-related requirements to fulfil (see here), but with a notional amount for tax and NI contributions deducted.
- If your actual combined earnings are above the joint earnings threshold, your actual earnings count in the UC assessment, with no minimum income floor.
- If your actual combined earnings (i.e., ignoring the minimum income floor) are below the joint earnings threshold in any assessed income period, your earnings are treated as being the individual earnings threshold (see here) less:
◦a notional amount for tax and NI contributions; and
◦an amount to ensure that, when added to your partner’s earnings, you are not treated as having more than the joint earnings threshold.
If you are a couple but claiming as a single person (e.g., because your partner is a ‘person subject to immigration control’), the minimum income floor does not apply to your partner’s self-employed earnings. Instead, her/his actual earnings are combined with yours.
Sara and Andy are a couple. Andy is a self-employed builder and Sara works part time in a shop. They have a two-year-old child and Sara is the ‘responsible carer’. Andy declares earnings of £500 and Sara £700. The DWP works out Andys minimum income floor to be £1,280 a month (35 hours a week x £9.50 x 52 ÷ 12 rounded down, less £160 for tax and NI contributions).
Andy and Sara’s actual combined earnings are £1,200 (£500 + £700).
This is below their joint earnings threshold of £1,938 (£1,280 for Andy plus £658 for Sara (16 hours a week x £9.50 x 52 ÷ 12 rounded down with no tax or NI contribution deduction at this earnings level)).
Adding Andy’s minimum income floor to Sara’s actual earnings gives £1,980 (£1,280 + £700). This is £42 above their joint earnings threshold of £1,938, so Andy is treated as having earnings of £1,238 (£1,280 – £42).