What’s the Minimum Income Floor (MIF) for Universal Credit?

Are you claiming the Universal Credit benefit – or thinking about applying for it? If you’re self-employed, you’ll need to know about the Minimum Income Floor rule. It affects your eligibility and the amount of money you could be eligible for.

The Minimum Income Floor can be a bit fiddly, and coronavirus has brought about some changes too. In this article we’ll cover the main points to be aware of.

• Universal Credit – are self-employed people eligible?
• Coronavirus: what support is available for small businesses and the self-employed?
• Self-employed benefits entitlement in the UK

What exactly is the Minimum Income Floor?

The Minimum Income Floor is a rule that applies to Universal Credit, a multi-purpose benefit in the UK which (among other things) provides financial support towards living costs for self-employed people on low incomes.

The government’s stated aim here is to target the benefit around people who are “gainfully self-employed”. In other words, to help those with viable businesses that are struggling in the short term – without keeping non-viable businesses artificially afloat in the long term.

How is the Minimum Income Floor calculated?

Normally (when there aren’t coronavirus-related adjustments in place), the Minimum Income Floor isn’t based on your actual earnings each month. It’s based on what the Department of Work and Pensions (DWP) would expect you to earn in your circumstances.

Your Minimum Income Floor is written down in your ‘claimant commitment’.

When you apply for Universal Credit, as part of the process, you’ll meet with a Work Coach at a job centre. They’ll discuss your situation with you, and together you’ll agree the number of hours you’re expected to work each week (and/or be available for work, and/or look for work). It’s often 35 hours, though it does vary from individual to individual.

The Department of Work and Pensions then calculates your Minimum Income Floor by multiplying your national minimum wage for your group with the number of hours you’ve agreed to work.

Bear in mind, the Minimum Income Floor was temporarily suspended due to coronavirus. We’ll go into more detail about this in a moment.

For example…

Let’s imagine your claimant commitment says you’re expected to work 25 hours a week, and you’re in the minimum wage group of £8.72 an hour. Here’s how you’d calculate your Minimum Income Floor:

• £8.72 an hour x 25 hours a week x 52 weeks a year = £11,336 per year
• then you divide that by 12 to get the monthly figure: £11,336 / 12 = £944.67 per month
• then you’d deduct the monthly National Insurance: £944.67 – £27.26 = £917.41
• there are no other deductions because your income is below the tax threshold
• this would give you a monthly Minimum Income Floor of £917.41

What happens if I earn more or less than my Minimum Income Floor?

If your actual earnings are higher than your Minimum Income Floor, the government will calculate your Universal Credit payment based on your actual earnings rather than your expected earnings.

If your actual earnings are lower than your Minimum Income Floor, the government will work out your Universal Credit payment based on your expected earnings. (Again, this is the way things work without any adjustments due to coronavirus.)

The more you earn above your Minimum Income Floor, the lower your Universal Credit payment will be. But overall, you’ll still be better off financially.

A rough guide is that for every extra £1 you earn above your Minimum Income Floor, your Universal Credit will go down by £0.63.

How has coronavirus affected the Minimum Income Floor?

With the ongoing economic uncertainty and instability at the hands of Covid-19, it’s much harder to draw a line between viable and non-viable businesses. So earlier in 2020, the government put in place a temporary change to the Minimum Income Floor.

Instead of using a claimant’s expected earnings to calculate their Universal Credit payment, the Department of Work and Pensions based it on the claimant’s actual earnings (all the way down to £0). This meant that more self-employed people became eligible for the benefit, and the amount that some people were eligible for went up.

The government also made it possible for you to apply for Universal Credit remotely, without seeing a Work Coach at a job centre as you would’ve had to in the past.

This temporary change in the Minimum Income Floor rule is due to reverse on 13 November 2020, unless the Department of Work and Pensions choose to extend it.

Nothing is certain yet. When asked about it in parliament in October 2020, Thérèse Coffey, Secretary of State for Work and Pensions, said that the policy is still under review.

What happens when the temporary changes to the Minimum Income Floor come to an end?

The situation is still in flux, so nothing is set in stone yet. However, if you’re currently receiving Universal Credit payments that you applied for after the Minimum Income Floor rule was removed due to coronavirus, you could lose access to the benefit.

The good news? You might still be eligible. It’s likely you’ll need to contact your local job centre to discuss your situation and agree your Minimum Income Floor.

For up-to-date guidance, keep an eye on gov.uk’s section about the Minimum Income Floor for self-employed people.

What are your thoughts on the Minimum Income Floor changes coming to an end? Let us know in the comments below.