Universal Credit

Claims will be made by households rather than individuals and the amount awarded will depend on the income and circumstances of all the household members. The government intends to make sure that no one, whose situation has otherwise not changed, ends up worse off when transferred to Universal Credit. Additional payments will be given if necessary, so these claimants don’t end up with less than they were getting in benefits before.

A major change is that Universal Credit will be paid monthly and all benefit payments will be made directly to individuals. There is a requirement for claimants to have a bank account or equivalent.

There will be a basic allowance with different rates for single people and couples and lower rates for younger people. Much the same as those used in Income Support, Jobseeker’s Allowance and the assessment phase of Employment and Support Allowance.

There will then be additional amounts available for those with:

• a disability;

• caring responsibilities;

• housing costs;

• children;

• childcare costs.

All of these payments are subject to a Benefit Cap.

Disability — The disability amount is intended to mirror the two components of Employment and Support Allowance paid during the main phase of the benefit. Disability Living Allowance (DLA) will be replaced by a new Personal Independence Payment (PIP). Most people currently getting DLA will eventually have to reapply for PIP. Even if you were getting DLA, you may find that you don’t qualify for the new payment or that the money you get will be less than it was on DLA.

Housing Costs — For people who rent, the amount for housing costs will be worked out in a similar way to the support provided by Housing Benefit (HB England, Scotland, Wales or HB Northern Ireland) under the current system. However, the intention is to make payment directly to the claimant as part of the Universal Credit, rather than to the landlord, to encourage people to manage their own budgets.

The Benefit Cap on the total amount of benefit you can get means you may lose some of your Housing Benefit. You won’t be able to appeal against this decision. You may have to find the money to make up your rent from other benefit income or consider moving to a cheaper home or area.

If you live in social housing, such as council or housing association accommodation, and you’re of working age, your Housing Benefit may be cut. This could happen if you have more bedrooms than are allowed after the changes.

For people with mortgages, there are no changes announced to the way that homeowners receive help with housing costs.

Children — The additional amount for children which forms part of Universal Credit will be paid as well as Child Benefit (see chapter 4).

Childcare — There will be an additional element of support to help towards a percentage of the costs of registered childcare, mirroring the childcare element of Working Tax Credit: 70% of up to £175 for one child or £300 for two or more children per week. It will be converted into a monthly limit for Universal Credit.

A difference is that it will be available to all lone parents and couples, where both members work, regardless of the number of hours they work, removing the requirement to work 16 hours.

Those without earnings or other income, will receive the basic allowance plus any additions relevant to their circumstances.

For those with earnings or other income this will be taken into account.

Earnings disregards

A disregard is an amount of money that a person can earn before their benefit starts to be reduced. The government plans to introduce earnings disregards to Universal Credit based on a person’s needs. For example, a couple with children will have a higher disregard than a couple without children.

Taper rate

As people have an increase in earnings, their benefit is reduced. The rate at which the benefit is reduced as the earnings increase is called the taper rate. For example, a taper rate of 80% would mean losing 80p of benefit for every £1 earned. In the current system there are several different taper rates, some apply to gross earnings and some to net earnings, so it is difficult for a claimant to know what effect an increase in income will have.

Universal Credit will have one taper rate for earnings set at 65%. The government state this is to make it affordable, but still offer people an incentive to work. Statutory payments, such as Statutory Sick Pay, will be treated in the same way as income from earnings.

Most income from other sources which a person could use to meet their living costs will be taken into account in full, so that Universal Credit is reduced pound to pound.