Major changes will be taking place to welfare benefits over the next few years. The Welfare Reform Act 2012 introduces a complete overhaul of the benefit system from 2013. The Government is also introducing a series of radical and widespread cuts to benefits and tax credits which will take effect over the coming years.
If you are concerned about the effects that these changes will have on your personal situation, contact our advice service.
• Changes to the Social Fund
• Disability Living Allowance replaced by a new Personal Independence Payment
• Changes to Child Benefit
What is it?
Universal Credit is the new means-tested credit for people of working age. It is intended to be a single payment for both working and non-working households with low incomes. The Government says it will greatly simplify the benefits system and ‘make work pay’.
It will replace
- Income Support
- income-based Jobseeker’s Allowance
- income-related Employment and Support Allowance
- Housing Benefit
- Working Tax Credit
- Child Tax Credit
Universal Credit will be rolled out nationally for new claims from October 2013. If you are already getting one or more of the benefits that are to be abolished, your claim will be transferred to Universal Credit at some point between 2014 and 2017.
The Government intends to make sure that no one ends up worse off when they transfer 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.
What about pensioners?
If you are part of a couple, you will be expected to claim Universal Credit until you both reach Pension Credit age. But if you are already getting Pension Credit at the time Universal Credit is introduced, you can continue to receive it even if your partner has not yet reached the qualifying age.
If you are part of a ‘mixed-age’ couple, and you think that you might qualify for Pension Credit, you might want to consider applying for it now. This is because Universal Credit will be paid at a much lower rate than Pension Credit and the working-age partner is also likely to have to meet the work-related requirements in order for you to get Universal Credit.
To find out when you will reach Pension Credit age, you can use the calculator at https://www.gov.uk/calculate-state-pension.
As Universal Credit replaces Housing Benefit and Child Tax Credit, and is only for working-age people, pensioners who have to pay rent and/or have dependent children will need to be supported in a different way. Therefore there will be some changes to Pension Credit so that it includes support for rent and an additional amount for those pensioners with dependent children.
What is the ‘claimant commitment’?
A basic condition of entitlement to Universal Credit is that you agree to a ‘claimant commitment’. This sets out your ‘responsibilities’ and, in particular, what work-related requirements (if any) apply to you. These requirements may also apply if you (or your partner) are working but your income is low.
If you do not comply with the requirements of your ‘claimant commitment’ the amount of your Universal Credit may be reduced. This is called being ‘sanctioned’.
If you have any concerns about your ‘claimant commitment’ or if you are sanctioned, contact us for advice.
What else is new about Universal Credit?
Universal Credit will take the form of a single monthly payment to a household. In exceptional circumstances it may be possible for payments to be made more frequently, or to be split between a couple.
There will be a basic allowance with different rates for single people and couples, and additional amounts available for those with:
- caring responsibilities
- limited capability for work
- housing costs
- childcare costs
People without any 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.
What is it?
From April 2013, a cap has been introduced on the total amount of benefits you can receive. It applies to people of working age whose household receives more than £500 a week in benefits (£350 for single claimants). Whilst most people on benefits are not affected by the cap, it may affect you if you are a large family and/or living in an area with very high rents eg London and the south east.
Some benefits are not taken into account including Council Tax support, support for childcare and discretionary housing payments. The income of any non-dependents living with you (such as adult children) won’t be counted when working out if your income is above the cap.
If you’re affected by the cap, your Housing Benefit payments will be reduced. When Universal Credit is introduced, deductions will be made from that.
Who is exempt from the cap?
The benefit cap does not usually apply if you are at least the qualifying age for Pension Credit. To find out when you will reach Pension Credit age, you can use the calculator at https://www.gov.uk/calculate-state-pension.
The cap does not apply if you, or anyone in your household receives
- Working Tax Credit
- Disability Living Allowance
- Attendance Allowance
- Personal Independence Payment
- Attendance Allowance
- Industrial Injuries Benefits
- Employment and Support Allowance, if paid with the support component
- War Widow’s or War Widower’s Pension
If you have been in work for at least 52 weeks and you lose your job through no fault of your own, the cap will not apply to you for 39 weeks.
The cap will not apply to ‘working families on Universal Credit’ whose earnings are above a certain level.
More information about the Benefit Cap is available at www.gov.uk/benefit-cap which includes an online benefits cap calculator, where you can test if it might apply to you. If the cap affects you, your Housing Benefit will go down and you may need to plan for this.
Think about these options:
- Can you or your partner get work, or increase your hours of work, so that you can claim Working Tax Credit? This would mean the cap would not apply to you
- Can anybody in your household get one of the benefits that mean that the cap won’t apply to you, or get one of the benefits that won’t be counted?
- Can you move to cheaper accommodation or negotiate a rent reduction with your landlord?
If your benefit is capped, you could try:
- applying for a Discretionary Housing Payment from your council. this could help in the short term to pay your rent, or pay for a deposit or removal expenses to help you move to cheaper accommodation. Government Guidance says that kinship carers should be amongst those who receive priority for Discretionary Housing Payments.
- contacting your council’s Children’s Services Department, especially if you are looking after a disabled child or a child whose health or development is likely to be damaged because of the reduction in your benefit. They may be able to help with a cash payment or other assistance.
- finding out if you can get any help from a charity. See our page on other sources of financial help.
From April 2013 your Housing Benefit may be cut if you are a Council or Housing Association tenant and your home is considered to be too large for you. This does not apply to you if you are no longer of working age.
If your home is considered to be too big for you, your Housing Benefit will be cut by:
- 14% of your rent if you have one spare bedroom
- 25% of your rent if you have two or more spare bedrooms.
You can use the CAB bedroom calculator for social housing tenants to check if your home will be counted as too large for you.
Are there any exemptions?
If you could previously afford to pay your rent without claiming Housing Benefit, but you start to need help because of a change in circumstances (eg if you lose your job) the rules about size restriction may not apply to you for up to 13 weeks.
If you are a disabled person and need a spare room for a carer to stay overnight your Housing Benefit should not be cut. If you have a disabled child who would otherwise be expected to share a bedroom with another child, your council should consider allowing you to keep an extra bedroom for your disabled child.
If somebody in your household has recently died, this could mean that your home would now be considered too big for you. However, if this happens, it should not affect your Housing Benefit for up to one year.
What can you do if your Housing Benefit is cut?
Check out your options and get help now. If you don’t do anything, you could end up losing your home. Here are some options to consider:
- applying to your local council Housing Benefit department for a Discretionary Housing Payment. However, councils only have a limited amount of money and will need to prioritise payments to disabled tenants whose homes have been specially adapted for them, and payments to foster carers
- making up the shortfall yourself from your other benefits or savings, if you have any
- trying to increase your income from paid work, for example by getting extra hours
- making sure you’re getting all the benefits you can, for example money to help you with the costs of a disability
- asking family members who live with you to contribute more
- moving to a smaller home in the social housing or private rented sector. Your landlord may be able to help you exchange your home for another, or give you priority for re-housing through the waiting list or bidding system. They may also offer you a sum of money or other help to encourage you to downsize
- taking in a boarder or lodger to live in your spare room. You would need to get permission from your landlord. Remember that income from a lodger may affect your benefits.
If you are affected by Housing Benefit cuts contact us for advice.
Council Tax Benefit replaced by ‘localised support’
Council Tax Benefit was abolished in April 2013. Individual local authorities can decide how to manage their local schemes but their budgets have been cut by 10% and they must continue to provide the previous level of support for pensioners. You should be able to find out more information from your local council.
Changes to the Social Fund
From April 2013, Community Care Grants and Crisis Loans have been abolished. They have been replaced by ‘locally administered assistance’ provided by the local authority.
Local authorities may choose to run a replacement scheme, but they don’t have to. They may choose to put the money towards supporting existing local schemes, such as foodbanks,credit unions and schemes which provide subsidised furniture and white goods.
Contact your local council for details of the scheme in place in your area.
Disability Living Allowance (DLA) replaced by a Personal Independence Payment (PIP)
The new benefit has been introduced from April 2013 for people of working age. If you are currently receiving DLA and you are aged between 16 and 64 you will be transferred to PIP if you satisfy the rules for this new benefit. Between October 2013 and March 2016 the DWP will write to claimants already getting DLA to invite them to make a claim for PIP. Whilst PIP has many similarities to DLA, the tests are more strict than those for DLA.
There are no current plans to replace DLA for children under 16 or for people aged 65 and over who are already receiving DLA.
From January 2013 households where at least one person earns more than £50,000 may be liable to the High Income Child Benefit Charge.
Households affected can choose either to stop receiving Child Benefit or choose to continue to receive Child Benefit with the money clawed back via the tax system. The “clawback” option will see the highest earner over £50,000 in a Child Benefit household paying an “income tax charge” equivalent to some or all of the amount they currently get. There will be no entitlement at all once income reaches £60,000 or more.
For more information and to check if you’re affected by the charge, see www.hmrc.gov.uk/childbenefitcharge.