Almost half a million people across the UK currently claim Universal Credit, a form of benefit that aims to help those who are out of work or are in a job and on a low income.
It was introduced to simplify the welfare system and is gradually taking the place of six other benefits and tax credits.
But, from 11th April, an important change has been introduced to alter the way the payments are calculated.
For anyone on Universal Credit or about to move onto the payments, it’s vital to understand what the changes are and how they might affect you.
What are the changes to Universal Credit?
The changes relate to something called the ‘taper rate’ – which refers to the amount which the money you claim ‘tapers off’ when you go back to work while on Universal Credit.
People claiming this benefit have a ‘work allowance’ and once they earn more than this amount, the money they can claim reduces. You can find more about work allowance and Universal Credit on the Money Advice Service website.
This work allowance is set at £192 a month – or £397 if the person does not claim any support with their housing costs.
Previously, claimants lost 65p for every pound they earned outside of the work allowance, that figure has now dropped to 63p. The Government says that this means that people are able to keep more of every pound that they earn.
However, the taper rate should not be seen in isolation. It follows cuts last year to the work allowance, meaning that people can now earn less before they start losing their benefit. Previously this work allowance was £263 a month or £734 for those who didn’t claim for housing costs.
What do they mean in practice?
The current changes do, however, go some way to allowing people to keep more of their money.
The Government points out that a couple with two children earning £30,000 a year could benefit by £425 a year.
The cost of giving a little more back to claimants is expected to be about £700 million a year by 2022, by which time everyone eligible is expected to have been moved over to Universal Credit.
‘Two children rule’
This is only the latest change to Universal Credit. The Government has also decided to limit payments to the first two children for new claimants, saying that it wants families on benefits to ‘make the same choices as those supporting themselves solely through work’.
The Child Poverty Action Group and Institute for Public Policy Research, however, said that the move could push another 200,000 children below the official poverty line and cause families to miss out on up to £2,870 a year.
It’s important to remember that the picture is liable to change and you need to understand everything about Universal Credit and the rules surrounding this, including how any savings you have might be taken into account and how sick pay, maternity pay and pension income are also taken into account and look out for any alterations to the arrangements, particularly when the Government draws up its next budget.