Government proposals for a universal credit to replace the tax credits system would, as currently drafted, have a severe impact on the self employed. The Chartered Institute of Taxation (“CIOT”) have submitted various concerns regarding the current proposals. One particular issue is a requirement for self employed individuals to report monthly earnings in a different way than they would for tax purposes and do so within a week of a month end. Also whilst the current tax credit system recognises cash payments on a month by month basis, the universal credit system does not, meaning that someone could in theory earn £1 million in the first month and then nothing thereafter and would still qualify for 11 months of credit. The CIOT state that the proposals require further thought to ensure they are workable and practical.