SELF-employed claimants could lose hundreds of pounds a year under Universal Credit, according to new research.

Issued today, work by Citizens Advice suggests that the move on to the new benefit could leave the financial security of low-paid workers hanging in the balance.

Meanwhile, those responsible for their earnings – including agency workers in the so-called gig economy – could take a major hit, receiving far less than employees at the same salary levels.

The charity said the Government must rethink planned cuts to the work allowance element of the benefit due to the risk of financial insecurity for Universal Credit claimants.

Gillian Guy, chief executive of Citizens Advice, said: “Despite the labour market changing significantly in the last decade, including a rapid rise in self-employment, Universal Credit is still better suited to those with regular jobs.

“The Government has shown it is prepared to act to improve Universal Credit as new facts come to light – an approach we strongly support. It now needs to look again at the design of the benefit to ensure self-employed and agency workers aren’t left at a financial disadvantage.”

The first of two reports by the charity highlights issues with the minimum income floor, a rule that assumes everyone claiming Universal Credit who has been self-employed for a year or more is earning the national minimum wage (NMW).

If they earn less than the NMW one month, their Universal Credit payment will not make up the difference. However, if their monthly earnings rise above the NMW, their benefit payment will be reduced in accordance.

The charity says this risks causing financial hardship as self-employed workers often earn different amounts from one month to the next. Its analysis shows that a self-employed worker who earned £9750 a year would be £630 worse off under Universal Credit than an employee with exactly the same circumstances.

In one case, the charity claims a family it aided had to turn to a food bank as a result of having less money to pay their bills because of the policy. To get more money through Universal Credit, the father was forced to give up his computing business and stop work altogether, while the mother cut short her maternity leave.

The second report found that employees could also be at risk of financial insecurity when they move to Universal Credit.

One of the largest of a series of cuts to Universal Credit announced in 2015 was to the work allowance, reducing the number of hours people can work before their Universal Credit payment starts to decrease.

Citizens Advice asked almost 900 people receiving in-work benefits how they would cope with a £100 drop in their monthly income, roughly the average amount affected households stand to lose from the reduced work allowance.

As many as 26 per cent said they would not be able to top up their income through employment even though they might need to, with a third of that group saying this is because they work full-time already.

Caring responsibilities (23 per cent) and having a disability (18 per cent) were other reasons workers gave for not being able to make up the shortfall through work.

Guy said the UK Government should also review the work allowance reductions, stating: “A failure to do this risks undermining two of the core purposes of Universal Credit – to incentivise people to move into and progress in work, and provide low-income families with financial security.”

Yesterday a change kicked in allowing claimants who get help with housing costs to have their benefit paid monthly, not fortnightly.

The Government claims three million working households will gain through the system.

Work and Pensions Secretary Esther McVey said: “Universal Credit ensures it pays to take on extra hours of work, and provides additional employment support to not only help get you into a job but also progress up the career ladder.”