Minimum income floor

Sunnyuk5

Hi All,

I'm a IT contractor. Self employed and employed by the same company. 

I make no profit but pay myself a monthly salary which goes to hmrc via rti feed. I also pay another part time staff a monthly salary.

My universal credit amount gets worked out by filling in a monthly income and expenditure. They also get my monthly paye rti from hmrc and calculate my payment. So my uc payment is mainly based on that paye income as my business makes no profit.

What will happen if minimum income floor gets applied in my case? Will it get applied to my business income rather than my paye salary? For example my business makes £2500 a month. From that I pay myself £2050. Pay the staff £200 and the rest are other business related expenses. I'm worried that uc will calculate my business income by applying the minimum income floor although the expenses are mainly due to staff salary. They will then assume two incomes, one the business mif and the other my paye salary.

Can someone advise?

Adrian_Scope

Hi @Sunnyuk5. Have you had a Gateway interview to determine whether you are "gainfully self employed"? 

Sunnyuk5

Hi,

No I haven't. I've been self employed since June 2021 and been receiving payments. Someone said mif might be applied in the future but that won't affect me as my paye income is more than the mif threshold. But then I realized shouldn't it affect my business income? Although large chunk of it is paid for staff wages.

Adrian_Scope

Okay, unless you are found 'Gainfully self-employed' the minimum income floor (MIF) won't apply to you @Sunnyuk5. 
And as you are earning above your MIF amount through PAYE the MIF won't apply to you either.

The minimum income floor only applies to those that are found to be 'gainfully self-employed' and earn below the amount expected for their circumstances. For those that are both employed and (gainfully) self-employed they use your combined earnings from both before applying the MIF.
As you're earning £2050 a month, the MIF won't apply to you.

Sunnyuk5

Thanks for the clarification. So just to confirm if I'm earning £2050 monthly salary and my business makes £2500 income, they will not apply a mif of £1200 to that £2500 as an example? In addition to my paye salary info they are getting from hmrc?

calcotti

Sunnyuk5 said:

Thanks for the clarification. So just to confirm if I'm earning £2050 monthly salary and my business makes £2500 income, they will not apply a mif of £1200 to that £2500 as an example? In addition to my paye salary info they are getting from hmrc?

In the example you gave your business doesn't 'make' £2500. The salary you pay yourself is a business expense. Your business has income of £2500 and expenditure of £2050. If there are no other expenses the self employed earnings are £450 which sit alongside employed earnings of £2050.

Sunnyuk5

So the £450 is the business earnings which may be used against mif and therefore the mif will be applied of let's say £1200? Obviously in my scenario my business makes no profit. But the uc advisor said that if I deduct a business expense of let's say £1000 for a pc, and it goes below the mif threshold, then the mif will be applied. That is if the mif gets assigned on my award.

I thought the mif gets applied if after deducting all expenses and it falls below the threshold? So we are saying saying mif we only be applied if threshold business makes a small profit? What if it makes no profit? Apologies for So many questions.

Sunnyuk5

He said mif will be applied to director my salary. But then it becomes not applicable. Sorry I am confused. Because he also mentioned if someone shows high business expenses like buying equipment then mif will be applied.

calcotti

If you are paying yourself £2050/month earned income you cannot be placed in the all related activity regime and therefore the MIF cannot be applied to you (because £2000 will be above your conditionality threshold).
see
ADM Chapter H4: Earned income - self-employed earnings (publishing.service.gov.uk)
para 4060