1. Universal Credit
What is Universal Credit?
To try to simplify the benefits system, the Government has announced that they are creating a new benefit, called Universal Credit, to replace most existing benefits and tax credits for people of working age. The benefits being replaced include:
- Working Tax Credit
- Child Tax Credit
- Housing Benefit
- Council Tax Benefit
- Income Support
- Income-based Jobseeker’s Allowance
- Income-based Employment and Support Allowance.
All of these payments will be wrapped into this new single benefit. Universal Credit will be paid either on an individual basis if claimants are single, or to couples jointly.
When calculating how much Universal Credit people will get the Government will include a basic rate called the ‘standard allowance’ and extra amounts for people in different circumstances – for example, if they are a carer, have children, a disability or need help with housing costs.
Under the old rules these amounts used to be called ‘premiums’ – for example the carer premium or the severe disability premium. In future, extra amounts for people in different circumstances in Universal credit will be called ‘elements’.
What will happen to me if I am currently getting one of the benefits being replaced by Universal Credit?
The Government plans to move everyone on the benefits listed above onto the Universal Credit within the next six years:
- In April 2013 a Universal Credit trial or ‘pathfinder’ will take place for new claims in just one Jobcentre Plus area in Ashton-under-Lyne, Tameside – the Government has said this trial will be expanded to a wider trial area across Tameside, Oldham, Wigan and Warrington in July 2013.
- Between October 2013 and March 2014 further local pilots across the country will take new claims.
- From April 2014 there will be a phased introduction of Universal Credit for all new claims which are made for the benefits listed above.
- From 2015, people on existing benefits will begin to be moved onto Universal Credit. This process will be complete by 2017.
The Government has said that no-one will be worse-off as a result of moving onto Universal Credit. The Government says it will ensure that people will get the same amount that they used to get under the old system when they move to Universal Credit. So if you were moved onto Universal Credit and it looked like you would end up worse-off, the Government has said it will provide a top-up payment to keep your income at the same level as your previous benefit/s.
However this protection would not be permanent - and may be very short-term - because if your circumstances change your income would no longer be protected.
So if, for example, you were getting Income Support and a ‘carer premium’ for looking after a partner, who also received Employment and Support Allowance, then you would both be guaranteed the same income when you were moved onto Universal Credit. But if your partner’s condition improved briefly and you were both able to work, but then their condition worsened again, you wouldn’t be guaranteed the same money when you claimed Universal Credit again.
Will I be able to get Universal Credit if I/my partner are earning/have savings?
Like the benefits it is replacing, Universal Credit will be ‘means-tested’. This means that anyone who applies for it will have their income and savings assessed. If they or a partner have income from benefits, earning or pensions over a certain amount or they have a certain amount of savings, they will be unable to get Universal Credit.
Income is looked at on a ‘household’ basis, so if you have a partner who is earning, their income will be taken into account. However, some income from benefits such as Disability Living Allowance and Attendance Allowance will be ignored. People will also be able to earn some income which will be ignored.
People receiving Universal Credit will be able to earn a small amount each week before their Universal Credit is affected. This amount is called a ‘work allowance’. The level may be higher if they have children or if they are disabled. If earnings are higher than the ‘work allowance’ amount then the person’s benefits will start to be gradually taken away.
One of the principles of Universal Credit is that people should be better off in work and better off working more hours, so there should be fewer ‘cliff edges’ in Universal Credit, where just earning a little bit more suddenly causes a big cut in benefits.
The Universal Credit system is also being designed to communicate with employers and the tax system. In theory this means that if someone receiving it earns a bit more one week and a bit less the next their benefits should go up and down automatically.
For Universal Credit, if you or you and a partner have over £16,000 of ‘capital’ (like savings, investments, certain compensation payments or property which you do not live in) you will not be able to receive any Universal Credit.
If you have between £6,000 and £16,000 the Government presumes you are getting some income from this ‘capital’ (like interest from savings, or dividends from shares). For every £250 of ‘capital’ over £6,000 you will be treated as having £1 a week in income. If you have less than £6,000 in ‘capital’, your Universal Credit claim will not be affected at all.