Impact of withdrawing emergency benefit measures

Annex B: Worked example of Minimum Income Floor

Table 4 illustrates the impact of reinstating the Minimum Income Floor on a single, self-employed parent who has been receiving UC for over a year. In addition to their standard allowance, they receive a child element, a childcare element, and a housing element. Their maximum UC entitlement comes to £1,679 per month, but since they earn £2,000 per month their UC entitlement reduces to £419. Their total income is therefore £2,419.

During Covid-19, their business suffers and their earnings drop to £500 per month. This is below their Minimum Income Floor, which is £1,205 per month (£8.72 National Living Wage at 35 hours per week, minus tax). Table 4 shows that, with the MIF suspended, their income only drops to £1,864, or 77% of their normal income. By contrast, if the MIF is reinstated, their income would drop to £1,419, or 59% of their normal income.

We have not considered the interaction between Universal Credit and the Self-Employment Income Support Scheme (SEISS) in this example. However, grants from the SEISS are treated as earnings for the purpose of calculating Universal Credit. The termination of the SEISS could therefore push some self-employed workers below the Minimum Income Floor.

Table 4: Self-employed worker with maximum UC entitlement of £1,680 per month experiencing a drop in earnings, monthly, £s