The UK government's new, one-size-fits-all approach to the benefits system is already rubbing a lot of people the wrong way, with long delays making times tough for many claimants. It's worth keeping an eye on what the new scheme means for the country's almost 5 million self-employed people as well. It turns out there might be a nasty little loophole in the system that could trip up quite a few of them at the worst possible moment.

It all boils down to the fact that being self-employed often involves accepting some variation in your income. It's not always predictable what you'll make from one month to the next. Right now, the Low Income Tax Reform Group is warning that the self-employed on relatively small incomes might find themselves £2,000 or more worse off a year.

Here's how it works. The Universal Credit system involves a calculation called the “minimum income floor”. That number represents the amount of cash the government thinks you'll have coming in after paying your tax and National Insurance. It's based on some guesswork about what you'd expect to earn in a similar job if you were employed by someone else. If your actual earnings are lower than the MIF for the kind of work and hours you take on, then the news is bad. The system uses the MIF to work out your Universal Credit instead of what you actually make.

When you're self-employed on a fairly low income, a few bad months could easily see you dropping below the MIF your Universal Credit's based on. Even large, one-off expenses could put enough of a dent in your earnings to drop you below the MIF for a month. If you can't consistently hit the MIF, you can lose out when claiming Universal Credit, simply because the government's assuming you are, or should be, making more. The Department for Work and Pensions' solution to the problem is simple: they reckon you should make more money. Here's what they have to say:

“Universal credit supports self-employed people for up to a year while they establish their business. If, after a year, the business isn’t meeting the minimum income floor, then they will have to either increase their self-employed earnings or take on additional work as part of their claimant commitment.”

Tricky little rules like this are why it's so important to let RIFT know throughout the year if your circumstances change. If your employment status or benefits situation shifts, get in touch as soon as you can. We'll explain exactly where you stand and how to make the best of it. Remember that we're here whenever you need us, with no hourly fees or extra charges. Whatever advice or help you need, it's all part of the RIFT service.