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Universal Credit

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Universal Credit will replace several key income-based benefits:

  • income based Jobseeker’s Allowance (JSA)
  • income based Employment and Support Allowance (ESA)
  • Housing Benefit, Child and Working Tax Credits

Income based benefits are those which take household income and capital into account when assessing eligibility. These benefits, which are being replaced by Universal Credit, are known as ‘legacy benefits’. However, Universal Credit will not replace:

  • contributions based JSA
  • contributions based ESA
  • State Pension and Pension Credit
  • Pension Credit will have a ‘rent element’ for those who need help with housing costs
  • Industrial Injuries Disablement Benefit.

Statutory payments:

  • Statutory Sick Pay
  • Statutory Maternity Pay
  • Statutory Paternity Pay
  • Statutory Adoption Pay
  • Disability Living Allowance (DLA) and Personal Independence Payment (PIP)
  • Carer’s Allowance
  • Bereavement benefits.

The above benefits are non-means tested. Contributory benefits are those paid based on your national insurance contributions of the previous two years. They do not take capital or household income into account.

Universal Credit is designed so you can leave it and rejoin it relatively easily, which will be useful for those on zero hours contracts, for example. If you leave Universal Credit, and have to reclaim within a 6 month period, you can keep your original Assessment Period (more on Assessment Periods)

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Roll out

Universal Credit is currently being rolled out in certain pathfinder areas (a list of these areas can be found here).

Roll out to date has been limited to single male claimants over the age of 18. Some pathfinder areas are now extending eligibility to couples without children. Each new roll out phase is known as a ‘tranche’.

The DWP aims for new claims to be accepted in every Job Centre area by the end of March 2016. From 2017, it is hoped the last new legacy benefit claims will be accepted, and the migration of legacy benefit claimants onto Universal Credit will begin in 2017. This is subject to IT issues being resolved, which have been a significant obstacle to roll out to date.  

All applications for Universal Credit will have to be done online. There will be support from a Universal Credit Helpline. Currently, there is no way to save or print an online claim, which will cause issues for many claimants, especially those accessing the form through a shared computer.

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Eligibility

Universal Credit is paid in arrears, in one monthly sum. Payment is made from the date of the initial claim, plus a seven day waiting period. The interval between payments will be known as the Assessment Period. Dates of assessment periods will vary between claimants. If you stop claiming Universal Credit, but return to claiming it within 6 months, you will be able to keep your previous Assessment Period.

Example: Joanne makes a claim for Universal Credit on 1 July. She is subject to a 7 day waiting period. Her assessment period will begin on 1 July, but will be paid on the 8 August to take into account the 7 day waiting period.

There are circumstances where the 7 day waiting period will not apply:

  • where claimant is terminally ill
  • where claimant is a victim of domestic violence
  • where claimant is a prison leaver   
  • where claimant is a care leaver.

Universal Credit can be backdated for a maximum of one month where there are extenuating circumstances. Scenarios that allow a backdated claim include:

  • previous benefit being terminated before being given notice of expiry
  • due to language, learning or disability, claim could not be made by phone/ in person/ by home visit
  • health condition prevented intended claim
  • re-claimed as a single person following termination of couple claim.
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Housing Costs

Universal Credit replaces Housing Benefit and Support for Mortgage Interest. Help for homeowners is only available to those not in any form of work.

Help with rent will be paid direct to tenants as part of the monthly UC payment. This has caused some concern, as previously Housing Benefit could be paid direct to landlords, especially social landlords. However, Landlords are able to claim direct payment if a tenant is over 2 months in arrears with rent. These agreements are known as Alternative Payment Arrangements (APAs). A claimant can request an APA when they are receiving ‘personal budgeting support’, which will be offered in partnership with agencies such as the Citizens Advice Bureau.

Since February 2015, landlords are informed when a tenant is in receipt of Universal Credit. The 'Under Occupancy Penalty' (bedroom tax) will apply to those in social housing, and Local Housing Allowance rates will apply to those renting from a private landlord. Discretionary Housing Payments will still be available under Universal Credit, but it will be down to Local Authorities to administer these payments.

For homeowners, help with mortgage interest payments will be available, but only where the claimant is not engaged in any work and will only cover up to the standard interest rate. As with Support for Mortgage Interest, there will be a waiting period before this assistance becomes payable, which is three assessment periods for Universal Credit. Although there is no support with mortgage payments for those that are in work, the monthly earnings disregard for those with children is significantly higher than for those without, which may be an effort to counter the risk of vulnerable claimants becoming homeless.  

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Earnings replacements

Income based Jobseeker’s Allowance (JSA) and income based Employment and Support Allowance (ESA) will be replaced by Universal Credit. As with legacy earnings replacements benefits, the basic allowance for both JSA and ESA Universal Credit claims is £317 per Assessment Period, with premiums added according to circumstance. Back to contents arrow_up-blue

Earnings replacements for those unable to work due to a health condition

As with ESA, the part of Universal Credit for those experiencing ill health will be made up of a basic allowance and two additional component groups, which claimants will be assigned to following a Work Capability Assessment.

The rates are paid monthly and are:

  • basic allowance of £317
  • work related activity group (for those who are assessed as being able to carry out up to 16 hours per week work activity): £126.11 on top of the basic allowance
  • support group (for those who are assessed as being unable to carry out any form of work related activity): £315.60 on top of the basic allowance
  • carer element (for those unable to work due to caring responsibilities): £150.39 on top of the basic allowance.

 There are no premiums for those in receipt of DLA and PIP. One person cannot get both the carer element and the sickness elements concurrently.

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Childcare costs

It is still possible to make new claims for Working and Child Tax Credit in 2015/16, but eventually these will be subsumed into Universal Credit. As with the childcare element of Working Tax Credit, claimants can receive up to 70% of their childcare costs as part of their Universal Credit payment.

From April 2016, the amount payable will increase to a maximum of 85% of childcare costs. There are maximum amounts that apply to childcare costs, and the maximum payable will be:

  • 70% of £646.00 per month for one child (increasing to 85% in April 2016)
  • 70% of £1108 per month for two or more children
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Reporting change of circumstances

With Tax Credits, claimants were expected to let HMRC know as soon as possible if earnings changed. In theory, the Real Time Information (RTI) software that all employers are obliged to use will notify the DWP of earnings changes, removing the onus to advise of changes. However, currently not all employers run this software and, as overpayments will have to be paid back by the claimant, it is advised that changes of circumstances are still reported directly to DWP by claimants.

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Personal Allowances 'elements'

As with the legacy benefits, people are given ‘allowances’ ( the maximum amount of Universal Credit they would be able to receive).  The standard monthly amounts are:

  • £317.82 for single claimants over 25 
  • £498.89 for a couple with one or both partners over 25

Additional premiums may be awarded according to individual circumstances, such as premiums for those caring for a disabled child, those unable to work over 16 hours due to a health condition (as with ESA), those with one or more children. It is worth noting that there are no premiums given for adults claiming PIP or DLA. For a full list of elements for Universal Credit, visit www.rightsnet.org.uk.  

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What is counted as income when assessing eligibility for Universal Credit?

Income is classed as ‘unearned’ and ‘earned’.  The following ‘unearned’ payments are counted when calculating eligibility for Universal Credit:

  • contributions based JSA
  • contributions based ESA
  • Pensions (both state and occupational)
  • tariff income from capital
  • most student income 
  • Trust income (unless arises from personal injury).

Unearned income that isn’t counted:

  • DLA, PIP and Attendance Allowance
  • income from lodgers 
  • child maintenance
  • charitable payments.

Earned income is income that arises from employment and includes:

  • income net of tax and NI contributions
  • SSP/ SMP/ SPP/ SAP

A portion of all earnings is subject to a ‘disregard’ and will not be counted when calculating eligibility for Universal Credit. Earnings disregarded are:

  • single, no children   £111
  • single, children   £263
  • single, sick    £193
  • couple, no children  £111
  • couple, children   £222
  • couple, sick    £192

65% of all income above this level will be counted as earnings. Only one disregard can be included per claim. It is assumed that employer RTI software will notify DWP of changes in income, and there is no onus on claimants to report changes themselves. However, it is still recommended claimants report changes themselves, to mitigate against possible software failures leading to overpayments.

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Self-employment

Those who are self-employed and wish to claim Universal Credit must attend a ‘gateway interview’. They must bring evidence that their work is genuine, takes up the majority of their day and is able to generate at least the equivalent of 35 x the hourly National Minimum Wage per week, known as the ‘minimum income floor’. If a self-employed claimant is earning less than 24 x the hourly NMW, they will be investigated. There is a one-year grace period to those starting self-employment, where they will not be expected to be earning the minimum income floor.

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Benefits capping

Benefits paid under Universal Credit will be subject to a benefits cap. This cap is:

  • £500 per week for families
  • £350 per week for those without children.

The cap will not apply to:

  • a worker earning over £450 per month
  • those with a DLA or PIP claimant in the family
  • war widows/ widowers
  • those in the Universal Credit support group

For the foreseeable future, it is likely that should you need to apply for support with housing, childcare and living costs, you will still apply for legacy benefits. However, should you find yourself in a Universal Credit area, and need advice on how it may impact you, please contact us.  

You may also find the following resources useful:

For a benefits calculator, which shows projected entitlements to Universal Credit, visit: www.turn2us.org.uk/Find-Benefits-Grants 

For information from the DWP on Universal Credit, visit: www.gov.uk/universal-credit

Information on housing costs and Universal Credit is available at:england.shelter.org.uk/get_advice/universal_credit 

Information on Tax Credits and Universal Credit from parenting charity Gingerbread is available at: www.gingerbread.org.uk/content/878/Universal-Credit-and-tax-credits 

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Need more advice?

Call RCN Direct on: 0345 772 6100