HR · 20 December 2017

Self-employed on universal credit will receive government business support

Universal credit has been criticised as unfairly penalising entrepreneurs
Universal credit has been criticised as unfairly penalising entrepreneurs

Low-earning self-employed workers receiving universal credit will be eligible for specialist business support, the government has confirmed.

Self-employed workers receiving full service universal credit will be offered mentoring via the New Enterprise Allowance (NEA), the state-funded initiative allocating startup funding and support for people claiming out-of-work benefits.

The support programme will be available to claimants whose business income falls below (or looks set to fall below) their minimum income floor (MIF) – a claimant’s monthly income after tax and national insurance has been deducted.

The promise of business support arrives after tax campaigners criticised the MIF as an unfair penalty on entrepreneurship, failing to account for fluctuating business incomes or large one-off purchases. This means a claimant’s MIF could have been set unrealistically high.

Subsequently, self-employed workers on universal credit risked being £2,000 worse per year than regular employees.

Read more: Universal credit leaving self-employed over £2,000 a year worse off than employees 

Business support will be provided for an initial 12 weeks and includes workshops on financial planning and marketing support, as well as helping claimants develop a business development and growth plan.

If the growth plan is viable, participants could receive a further year of support and mentoring. Universal credit claimants who own their own business are eligible for mentoring, but not financial support.

Commenting on the announcement, employment minister Damian Hinds said: “The NEA has been a huge success in supporting enterprising jobseekers turn their business dreams into a reality, and now we’re offering mentoring to help people in receipt of universal credit who are already self-employed as they grow their businesses.

“Small businesses are the backbone of our economy and we want to do all we can to ensure people succeed.”

The Department for Work and Pensions’ (DWP) universal credit scheme has seen a number of existing benefits combined into a single payment, and will replace working tax credits as the primary welfare support for low-earning self-employed workers dependent on in-work benefits.

New government figures have shown that 111,540 businesses have been founded via the NEA since it launched in 2011. NEA participants receive a weekly allowance of £65 for 13 weeks and £33 per week for the next 13 weeks.

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NEA

 

New Enterprise Allowance is turning jobseekers into entrepreneurs

In the last six years, 111,500 unemployed Britons have been given the resources needed to bring their business idea to life

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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