Universal Credit Update - Autumn Budget
It was announced in the Autumn Budget that workers on Universal Credit will get a cash boost by 1 December. The taper rate, which is the amount Universal Credit payments are reduced by when you're in work, will fall from 63% to 55%. In addition, the amount households with children or a limited capacity for work can earn before they're hit by the taper rate will rise by £500 a year. However, the budget stopped short of reintroducing a £20 a week uplift for all Universal Credit claimants.
Here are a couple of examples to show how the changes may impact claimants who are working:
The tenant is 26 years old, renting a 1 bedroom property at £400 each month and earns £1200 each month. Their maximum UC award will be worked out as follows:
- Standard allowance £324.84 + £400 Housing Cost = £724.84 max UC payable.
- As the tenant is working, their income will be taken into consideration at a rate of 63p in the £1 which gives a figure of £756 to be used as earned income. As they are single there is no work allowance applied.
- Their UC payment is based on their Maximum UC Entitlement of £724.84 – income figure of £756 = £0 UC payable.
When the changes to income taper come in on 1st December the income figure used for the UC calculation will be based on 55p in the £1. This would result in only £660 of their income being assessed. UC payment would now be £724.84 - £660 = £64.84 so they would now be entitled to £64.84 UC each month.
A single 26 year old parent with 3 year old child, renting a 2 bedroom property at £450 each month and earns £900 each month. Their maximum UC award will be worked out as follows:
- Standard allowance £324.84 + £237.08 child element + £450 Housing Cost = £1011.92 maximum UC payable
- A work allowance is applied to the earned income as the tenant is a single parent. Currently this is £293. This is deducted from the earned income before the 63% taper is applied so income to be used for UC purposes is £900-£293 x 63% = £382.41
- Maximum UC Entitlement of £1011.92 – income figure of £382.41 = £629.51.
Whenthe changes to work allowance and income taper come in on 1st December the figures used for the UC calculation will be work allowance of £335 and income based on 55p in the £1. This would result in only £310.75 of their income being assessed. UC payment would now be £1011.92 - £310.75 = £701.17, an increase of £71.66 each month.
If you do not currently qualify for UC, but you think you may qualify from 1 December, and would like help from Anne to make a new claim, you can get in touch by clicking on the Money Advice button in My Home and leaving your details.