What is Universal Credit?
Universal Credit is a new benefit that will replace six existing benefits with a simpler, single monthly payment.
Plans for the Universal Credit (UC) were first announced in 2010. Starting in October 2013, it will replace a number of existing benefits. The new credit system is administered online and is intended to streamline the benefits system.
What is Universal Credit?
The UC is a means-tested benefit for anyone of working age. The upper age limit is set at qualification for the Pension Credit. The UC is not intended to be an in-work or out-of-work benefit but it is fundamentally a single credit irrespective of the claimant’s employment status. UC aims to make it easier to manage the change from unemployment to employment since people won’t need to keep changing from one benefit to another as their income circumstances change.
UC seeks to improve work incentives through a combination of earnings disregards and lower benefit withdrawal rates. It is also expected to smooth the transitions in and out of work. Merging a number of existing benefits into a single universal payment also reduces the complexities and costs of the current multi-benefit system.
UC is being introduced in three phases between October 2013 and 2017, having been pilot-tested in pathway areas from April 2013.
From October 2013 to April 2014, new claims for out-of-work support are regarded as claims for the UC; no new claims for the jobseeker’s allowance, employment and support allowances, income support or housing benefit are accepted; anyone shifting from out-of-work benefits to work will be moved onto the UC by way of transition if that is appropriate.
As from April 2014, no new claims are accepted for tax credits.
From April 2014 to October 2017, all existing benefits claimants are switched across to the UC.
What remains and what is abolished?
The UC will, in time, see the end of a number of individual benefits. These include:
• Income support
• Income-based job seeker’s allowance
• Income-related employment and support allowance
• Housing benefit
• Council tax benefit
• Child tax credit and the working tax credit
• Crisis loans
• Community care grants
• Budgeting loans (these will be replaced with payments on account where cases of need demand.
Not all separate benefits will be replaced, however.
Who can claim?
There are a number of provisions in the Welfare Reform Act 2012 which determine who may claim the UC.
Single people or members of a couple together can make a claim. To qualify you will need to be at least 18 years of age and under the age that entitles you to the Pension Credit. In the case of couples, where one partner reaches Pension Credit age before the other, the pair must continue to claim the UC until both have reached the threshold for the Pension Credit.
What about income disregards and taper?
There are no changes to the regulations on capital as they apply to those on income support. In other words, people with savings above £16,000 will be excluded from the UC.
However, some income is to be disregarded. A disregard is the sum of money a person can earn before their benefit is gradually reduced or stopped altogether. The UC will see earnings disregards based on individual needs. For example, a couple with children will enjoy a higher disregard than a couple without children.
The disregards for the UC include the disability living allowance and the personal independence payment, which replaces it in 2013. Other sources of income, such as workplace and personal pensions, will be taken into account when calculating any UC entitlement.
Different amounts will be disregarded from earnings to accommodate the circumstances of different individuals and families.
Claimants in work are entitled to a work allowance of £111 a month, to which additions may be made for children or where either the claimant or their partner is disabled. Housing costs will also…