How to simplify the complexity of surplus earnings
Download as PPTX, PDF0 likes278 views
The document outlines a webinar discussing the complexities of surplus earnings and their implications for those receiving Universal Credit and SEISS due to irregular income, particularly in light of the COVID-19 pandemic. Key points include how surplus earnings regulations can affect claimants with fluctuating incomes, the challenges posed by non-traditional working patterns, and examples illustrating how these regulations apply in practice. The discussion also emphasizes the importance of support tools, such as benefit and budgeting calculators, to help advisors and clients navigate these complexities.
How to simplify the complexity of surplus earnings
- 1. How to simplify the complexity of surplus earnings Wednesday 1 July Policy in Practice webinar
- 2. Housekeeping www.policyinpractice.co.uk ● Audio check ● Please ask questions ● Poll and a survey ● Aim to finish by 11:30 with optional 15 mins extra ● Slides and recording will automatically follow ● We’re live tweeting via @policy_practice with hashtag #HelpfulPolicy
- 3. Today’s speakers www.policyinpractice.co.uk Janet Harkin Head of Marketing Policy in Practice @jharkin Zoe Charlesworth Head of Policy Policy in Practice @ZoeCharleswort1 Duncan Hatfield Policy and Operations Analyst Policy in Practice @drh000 Sue McCarron Ask Us Wirral Service Manager Citizens Advice Wirral @WirralCAN Peter Carter Business Account Manager Policy in Practice @petersgc_
- 4. www.policyinpractice.co.uk Give the best support you can to help people on their way policy software analytics
- 5. Agenda www.policyinpractice.co.uk/software ● A simple guide to the SEISS, Universal Credit and surplus earnings rules ● Worked examples illustrating the challenge, and what to look out for ● How Wirral Citizens Advice helps people with fluctuating income ● Questions and answers ● Stay on for 15 mins for a Benefit and Budgeting Calculator demo (optional)
- 6. 666 Poll: What do your clients find most difficult about irregular income? www.policyinpractice.co.uk
- 8. Evidence to the world of work inquiry www.policyinpractice.co.uk/coronavirus The increase in non-traditional working patterns provides an opportunity for those with hidden barriers to work to engage with the labour market However, flexible working patterns can also come with greater insecurity and do not easily fit with benefit systems designed around full time regular work This lack of fit between work and benefits means households risk having to choose to engage with only one of these 1. Universal Credit does not work well for households who are not paid monthly 2. People who work zero-hour contracts do not see support when they need it. 3. Monthly work allowances do not respond to fluctuating earnings. 4. Monthly Assessment Periods do not adequately support self-employed households 5. Fluctuating incomes can invoke complex surplus earnings regulations
- 9. Recap on measures put in place www.policyinpractice.co.uk/coronavirus
- 10. Covid measures (1): Job Retention Scheme www.policyinpractice.co.uk/coronavirus ● Represented through PAYE before 19 March 2020, with a UK bank account ● Up until August 2020, CJRS pays 80% of the salary, up to £2,500, plus employers NI contribution and minimum pension contribution ● Originally, could not undertake work for that employer and furlough must last at least 3 weeks. After July, furlough can be part time ● The employer claims through HMRC New rules 30 June Closed to new applicants. After this only those that have previously been furloughed for 3 weeks can be furloughed. So final day for new furlough is 10 June July 2020 Part-time furlough and minimum of 1 week August 2020 Employer pays NI and tax September 2020 Employer also pays 10% of wages (CJRS pays 70%) October 2020 Employer also pays 20% of wages (CJRS pays 60%)
- 11. Covid measures (2): Self-employed Income Support www.policyinpractice.co.uk/coronavirus ● Open to those who have completed a self-employed tax return for 2018/19, are currently self-employed, intend to remain self-employed and have lost money due to Covid19 ● Must have self-employed trading profits less than £50,000 in 2018/19 and self-employment more than 50% of taxable income. Or over last 3 years. ● Average of 80% of trading profit calculated over last 3 tax years, up to £2,500/month ● HMRC will invite claimants to apply and can apply up to 13 July 2020 ● Grant paid as a lump sum and counts as business income for tax credit and UC purposes New rules August 2020 SEISS 2 opens. This will cover 70% of profit capped at £2,250. Paid in one 3 month instalment from August onwards
- 12. Surplus earnings www.policyinpractice.co.uk/coronavirus Surplus earnings regulations introduced to prevent abuse of the benefits system Example Someone arranges with their employer to pay all their annual salary of £30,000 in one month. They won’t receive UC for that month but could claim full UC based on nil income for the rest of the year. If the person received monthly salary payments of £2,500 they would not be eligible for UC
- 13. Surplus earnings www.policyinpractice.co.uk/coronavirus Who is affected? ● Surplus earnings apply to both employed and self-employed claimants ● Prior to Coronavirus most likely to affect those with 2 x monthly earnings or 3 x fortnightly earnings OR self-employed ● Now most likely to affect employees with backdated furlough payments and those receiving SEISS
- 14. Surplus earnings www.policyinpractice.co.uk/coronavirus Surplus earnings will be applied to a new claim to UC where the claimant, or either of joint claimants: 1. had an award of UC (the “old award”) that terminated within the 6 months ending on the first day in respect of which the new claim is made and 2. has not been entitled to UC since the old award ended and 3. had total earned income in the final AP of the old award that exceeded the relevant threshold Where surplus earnings are to be applied to a new claim to UC, they will be treated as earned income for the purposes of determining entitlement to UC, or calculating the amount of that award where there is entitlement If a claim is made after the six month period above, surplus earnings will not be applied and the UC award will be calculated in the normal way UC Regs, reg 54A(2)
- 15. Surplus earnings www.policyinpractice.co.uk/coronavirus Exception Surplus earnings will not apply where the claimant has, or had at the time the old award terminated, recently been a victim of domestic violence UC Regs, reg 54A(5); 2 reg 98 Self-employed losses Self-employed claimants can offset trading losses against earnings. There is no limit to the time that losses can be carried forward as long as they have not been offset against previous earnings
- 16. Surplus earnings www.policyinpractice.co.uk/coronavirus History ● Draft regulations had a de minimus of £100 (affects 40% of claimants) ● Regulations has a de minimus of £300 on the advice of the SSAC (affects 20% of claimants) ● From 2018 the DWP increased the de minimus to £2,500 in preparation for managed migration pilot “to provide for effective test and learn arrangements. The Committee highlighted the importance of capturing learning around the formidable challenges in communicating the policy to claimants” ● The £2,500 has been retained during Coronavirus measures (until March 2021) ● From April 2021 the de minimus will return to £300
- 17. Surplus earnings: example www.policyinpractice.co.uk/coronavirus Example Mateo is single living in private rented accommodation He is self-employed providing a mobile cocktail bar Since lockdown his income has fallen to £0 Mateo receives £650 Universal Credit/month In June, he received a Self-employed Income Support Scheme payment (SEISS) of £7,500 (gross)
- 18. Surplus earnings: example www.policyinpractice.co.uk/coronavirus Calculate Nil UC amount: Mateo’s nil UC threshold = ((Max UC – unearned income) /0.63) + WA = ((£650-0)/0.63) + 0 = £1032 Calculate relevant threshold Nil UC amount PLUS “de minimus” amount (£2,500) = £1032+ £2,500 = £3,532 ● If Mateo’s net earnings are over £3,532/month then surplus earnings regulations will apply ● In June Mateo receives £7,500 (£5,800 net) from the SEISS so the surplus earnings regulations apply
- 19. Surplus earnings: example www.policyinpractice.co.uk/coronavirus Calculation Month 1 Income of £5,800 is above the relevant threshold of £3,532 so Mateo’s UC is NIL Calculate amount to c/f to month 2 (original surplus): £5800 - £3532 = £2,268 Month 2 Income used is £2,268 c/f from the previous month His UC is NIL Calculate amount to c/f to month 3 (adjusted surplus): £2,268 - £3532 = NIL Month 3 Mateo receives full UC of £650
- 20. Surplus earnings: impact on household income www.policyinpractice.co.uk/coronavirus Impact
- 21. Surplus earnings: impact of SEISS www.policyinpractice.co.uk Impact From March to August Mateo receives £8,400 Without the grant he would have received £3,900 (6 payments of UC) So, the grant is worth £4,500 (not £7,500 gross / £5,800 net) There are implications for advisors due to complexity There are implications for the claimant in order to budget
- 22. Surplus earnings: complications www.policyinpractice.co.uk ● Combined surplus earnings of joint claimants if they form a new partnership. ● If the claimant moves from a joint claim to a single claim 50% of surplus is taken into the single claim ● Minimum Income Floor applies after calculation of surplus earnings ● Before May 2020: the claimant had to reclaim each month. However, reclaiming if income goes up could increase the surplus. The general rule for clients was to reclaim if earnings reduce in order to “use up” the surplus earnings but not reclaim if earnings increase ● From May 2020: special arrangements under Coronavirus. The DWP will presume that the claimant has reclaimed each month (for up to 5 months) and automatically reinstate UC if appropriate. This is discretionary and there is some confusion about how this will work
- 23. www.policyinpractice.co.uk Identify to household level with LIFT
- 24. Surplus earnings: benefit calculator www.policyinpractice.co.uk
- 25. 252525 Over to Duncan Worked example live in the Benefit and Budgeting Calculator www.policyinpractice.co.uk
- 26. 262626 Over to Sue McCarron, Citizens Advice Wirral www.policyinpractice.co.uk
- 27. Please introduce yourself and Citizens Advice Wirral
- 28. What three main issues are your clients facing with fluctuating income?
- 29. Can you give us a case study showing how you helped a client deal with the issue?
- 31. ● Blog post: How do the surplus earnings rules work in practice? ● For up to date information on the welfare support available see www.policyinpractice.co.uk/your-income-and-coronavirus-covid-19/ ● Follow up email with webinar recording and slides, with links ● Short survey to follow ● Next webinar: ○ How data analytics helps councils look to recovery on Wed 6 August at 10:30 Practical tools that can help www.policyinpractice.co.uk/events
- 32. 323232 Would you like to stay for a 15 minute demo of how the Benefit and Budgeting Calculator helps you give more support? www.policyinpractice.co.uk
- 33. 333333 Thank you Zoe Charlesworth, Policy in Practice Duncan Hatfield, Policy in Practice Peter Carter, Policy in Practice Sue McCarron, Citizens Advice Wirral hello@policyinpractice.co.uk 0330 088 9242 www.policyinpractice.co.uk
- 34. 343434 Over to Peter for a quick look at the software www.policyinpractice.co.uk
- 35. www.policyinpractice.co.uk 1. Focus on one cohort with LIFT
- 36. www.policyinpractice.co.uk 2. Identify to street level with LIFT
- 37. www.policyinpractice.co.uk 3. Identify to household level with LIFT
- 38. www.policyinpractice.co.uk 4. Understand a household’s journey
- 39. www.policyinpractice.co.uk 5. Track outcomes over time with LIFT
- 40. 404040 Thank you hello@policyinpractice.co.uk 0330 088 9242 www.policyinpractice.co.uk