The Low Incomes Tax Reform Group (LITRG) has called for universal credit to be changed for self-employed claimants. The group warns that if these changes are not made, then people will be dissuaded from becoming self-employed and claimants might have no choice but to give up work.
LITRG wants to see the following changes: flexible workers often have a fluctuating income over the year and this should be taken into account when calculating the amount of money they should receive; the calculation of the “minimum income floor” should be changed, and the start-up period should be increased, during which period the floor should not apply; there should also be greater consistency in how self-employment is defined, and there should be special support for self-employed claimants.
LITRG first raised concerns about universal credit when the White Paper on universal credit was first published in 2011. Some small alterations have occurred since then, but the major concerns have not been addressed. LITRG claims that the current system neglects flexible workers who have a fluctuating income, those who have a sizable one-off business expense in a given month, or those who are trying to establish and develop their company.
The report from LITRG summarises the main limitations of universal credit with regards to the self-employed, while also suggesting amendments that would improve the system for flexible workers and so encourage entrepreneurship as well as relieving administrative burdens. The LITRG model would treat the self-employed fairly and would give them greater parity with employees.