Minimum Income Floor calculation

I am looking for any guidance about how DWP work out the deduction for tax & NI for the purposes of the Minimum Income Floor calculation reg 62(4)(b) UC regs “deducting such amount for income tax and national insurance contributions as the Secretary of State considers appropriate.”

I have seen example given in CPAG, on the Citizens Advice website and the figures used by Lisson Grove’s Quick Benefit Calculator all seem to be slightly different!

ADM H4079 says: ” The figures used in the example above are for illustrative purposes only. Up to date tax and national insurance information can be found at http://www.hmrc.gov.uk.” which is not terribly helpful.

I know this is moot given the suspension of the Minimum Income Floor but I’d like to understand if any guidance exists for decision makers or whether they are as lost as I am and have to just take a stab at it?

I believe they simply use a calculator provided for this on the UC computer system, so I doubt there’s any guidance on how to actually calculate it.

I’ve checked the calculation it a few times in the past, and don’t remember being surprised by the figure UC have come out with. It’s a basic notional IT, Class 2 and Class 4 NICs calculation. Different examples you’ve seen may have been calculated using different years’ rates.

For example, someone over 25 with an expected number of hours of 35, will have a gross earning threshold of 35*£8.72*52/12=£1,322.53.
Monthly equivalent of the £12,500 threshold for income tax is £1,041.67.
(1322.53-1041.67)*0.2=£56.17.
Class 2 NICs: £3.05*4.33=£13.22.
Class 4 NICs threshold is £9,500. Monthly equivalent is £791.67.
(1322.53-791.67)*0.09=£47.78.
Total IT and NICs: £56.17+£13.22+£47.78=£117.17.
Leaving a MIF of 1322.53-117.17=£1,205.36.

Although differing by 1p, our (currently free) MIF Reckoner at https://www.ferret.co.uk/reckoners/free/ agrees with Charles.

It works out the MIF (zero at the moment) but does display the calculated figures, inc. notional tax and NI, for future indication.

Hi both,

Thanks for those replies. I’ve been doing a bit more digging and discovered that I think the calculation above and the reckoner are slightly out because they don’t take account of the rounding rules in reg 6(1A).

This discussion has helped me understand the calculation much better, so thanks for your help.

James

Which bit of 6(1A)?

I presume he means the reference to Reg 90 (which is referred to in Reg 62(4)).

Yes, that is what I mean, apologies.

reg6(1A)(a) provides that the individual earnings threshold is to be rounded down to the nearest whole pound and therefore in Charles example (above) the Individual Earnings Threshold would be £1322 because the 53 pence is disregarded.