Self-employed 'up to £3,000 worse off each year' under universal credit

Welfare reform is most damaging for self-employed because it does not take into account income varies 'hugely' from month to month, ministers warned

The IPSE is urging the government to halt the reform’s rollout so its flaws can be addressed (Shutterstock)

Self-employed people will be up to £3,000 worse off each year under universal credit, a group representing freelance workers has warned.

The Association of Independent Professionals and the Self-Employed (IPSE) warned that the welfare reform was most damaging for self-employed people because it does not take into account of the fact their income can vary “hugely” from month to month.

“This means a self-employed person can end up £3,000 worse off each year under universal credits compared with an employee earning the same amount. That is a significant amount of money,” said Imogen Farhan, IPSE’s policy and external affairs officer.

The IPSE is now urging the government to “urgently halt” the reform’s rollout so its flaws can be addressed.

The latest warnings come after ministers were accused of presiding over a catalogue of errors in universal credit. A report by the National Audit Office (NAO) found the new benefit was failing to deliver value for money and is pushing claimants into further financial difficulties.

The research also found that universal credit may cost more than the social security system it replaces – and warned there was no way of measuring whether it will meet its economic aim of getting 200,000 more people into work.

Concerns around how the self-employed would be affected were raised last week when a coalition of businesses, unions and charities – including the Federation of Small Businesses, the Royal Society of Arts and the Trussell Trust – warned the reform would damage entrepreneurship.

Ms Farhan said: “The widespread condemnation of universal credit is clear and damning evidence of how damaging the policy has been.

“Why should a farmer who sells or produces crops only at a particular time of year be penalised? The government must address the problem of monthly reporting by considering self-employed earnings over a more reflective annual basis.

“The latest criticisms come just three months after a particularly disparaging report by the NAO which clearly highlighted the ballooning costs of the scheme, as well as the ‘difficulties and hardship’ individuals are experiencing as UC is rolled out.

“The growing warnings of not just the NAO but the many other independent bodies must be heeded. The government cannot bury its head in the sand about universal credit’s failures any longer.”

A Department for Work and Pensions spokesperson said: “Universal credit is paid monthly to mirror the way that most people in work are paid, and to reflect claimants’ circumstances at the point of payment, which better anticipates their needs for the coming month.

“We recognise the importance of entrepreneurship in boosting the economy which is why universal credit supports self-employed people during the first year while they establish their business."