But while Universal Credit claimants will be hit, the Government has confirmed Working Tax Credit claimants and those on low incomes should not see their payments altered.
How will the Health and Social Care Levy affect benefit claimants?
Recently, the DWP was pushed on the levy in the House of Commons. Rachael Maskell, the Labour (Co-op) MP for York Central, said: “To ask the Secretary of State for Work and Pensions, what assessment she has made of the impact of the Health and Social Care Levy on working people claiming (a) Universal Credit, (b) working tax credit or (c) other benefits.”
Yesterday, David Rutley, the Parliamentary Under-Secretary at the DWP, responded to this question.
“From April 2022 a National Insurance increase of 1.25 percentage points would only impact on earnings above around £800 a month. The lowest earners would not be affected,” he said.
“Universal Credit and, where appropriate other benefits, normally take account of net earnings in determining the amount of benefit.
“A change in National Insurance contributions paid will impact net earnings and therefore the calculation of benefit entitlement. Tax Credits entitlement is calculated using gross earnings, the Health and Social Care Levy will not therefore affect the level of support paid to Working Tax Credit customers.”
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How are Universal Credit payments calculated?
Universal Credit itself is currently made up of standard allowances which have extra amounts added on top of them. Extra amounts are awarded for certain life costs such as childcare costs and rent.
The standard allowances are split into four categories which are based on age and relationship status. Currently, standard allowances are higher for those whose assessment period ends before October 6, 2021.
For those whose assessment period ends on or after October 6, 2021, the following amounts will be applicable:
- Single and under 25 – £257.33 per month
- Single and 25 or over – £324.84 per month
- In a couple and they’re both under 25 – £403.93 per month (for both)
- In a couple and either are 25 or over – £509.91 per month (for both)
Universal Credit can be claimed by those who are employed, but the more they earn the less they’ll receive in support. Universal Credit payments will reduce gradually, reducing by 63p for every £1 earned.
There is no limit on how many hours can be worked while claiming Universal Credit and work allowances are applicable. Claimants can earn a certain amount before their Universal Credit is reduced if they, or their partner, are either responsible for a child or living with a disability or condition which affects their ability to work.
The monthly work allowance is £293 for those getting help with housing costs or £515 where no help is received.
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How to claim Universal Credit
Universal Credit can be claimed by anyone who is on a low income or out of work entirely, so long as they are aged between 18 and state pension age. Additionally, claimants must have no more than £16,000 in savings and be living in the UK when claiming.
Claims for Universal Credit are made online through the Government’s website. People will need to apply as a couple if they and their partner live together, they do not need to be married.
When applying, claimants will need to have the following ready:
- Their bank, building society or credit union account details
- An email address
- Information about their housing, for example how much rent is paid
- Details of their income
- Details of savings and any investments, like shares or a property that is rented out
- Details of how much is paid for childcare if they’re applying for help with childcare costs
This is important to note because if the correct information is not provided, it could affect how much is paid out. The Universal Credit team may also contact applicants after an initial claim if further information is needed.
Tough times ahead
Going forward, Universal Credit claimants will face lower payments as the Government removes a temporary uplift which was provided in the face of the pandemic. Universal Credit payments will be lowered by £20 per week, or just over £1,000 a year.
Many charities and experts called for the Government to extend this uplift as many families were expected to struggle as the Autumn months arrived. These problems are also expected to be worsened by a sudden and unexpected energy crisis.
On this, Ofgem recently released its latest Social Obligations Report, which outlined 1.6 million electricity and 1.2 million gas accounts that have fallen behind on their bills. Of these, nearly 1.5 million had no repayment plan in place. According to Anita Dougall, the CEO of data expert Sagacity, “things are set to get worse” as rising gas prices lead to even higher energy bills across the UK this winter and “Britain’s poorest grapple with losing £20 a week from Universal Credit.”
Ms Dougall continued: “These figures provide a taste of things to come, as the number of people struggling to pay their energy bills is going to shoot up this winter. With the financial impact of the pandemic far from over, households across the UK will now also face rising energy bills, while many will also be losing £20 a week through Universal Credit cuts.
“This means it will be more important than ever before for energy companies to deliver on their responsibility to support vulnerable customers. This year the number of people in arrears and without a repayment plan rose by 15 percent in gas and 12 percent in electricity, leaving them at risk of building up even more debts.”
More Government support is coming
As rising energy and inflation fears emerged, the Government announced further support would be forthcoming. On September 30, Rishi Sunak and Thérèse Coffey launched a £500million support fund which would allow “vulnerable households” to access funds to help cover essential costs over the coming months. The new Household Support Fund will be managed by local councils who “know their local areas best and can directly help those who need it most”.
The Chancellor commented on the launch: “Everyone should be able to afford the essentials, and we are committed to ensuring that is the case.
“Our new Household Support Fund will provide a lifeline for those at risk of struggling to keep up with their bills over the winter, adding to the support the government is already providing to help people with the cost of living.”
However, while this news was broadly welcomed, StepChange argued more work needs to be done.
Richard Lane, Director of External Affairs at StepChange, said: “This fund will provide welcome financial relief to households who face a perfect storm of cuts to Universal Credit, rocketing energy bills and inflated food prices in the coming months. We agree with the Chancellor that absolutely everyone should be able to makes ends meet – for this to be a reality the Government must build on today’s announcement with plans to help households who are already struggling, including the three million people who’ve had to turn to high cost credit to get by since the start of the pandemic.
“This must come in the form of sustained financial support, which the Government can begin to provide by reversing its decision to cut Universal Credit by £20 a week. For our clients who rely on it, this cut will see their average budget deficit triple from -£40 a month to -£126 a month.
“A locally delivered grant fund is important for helping with emergency and crisis spends, and we would like to see this type of support extended to help tackle the millions in rent debt private tenants have amassed during the pandemic. But it must be matched by nationally delivered support, and £500million in a discretionary fund won’t plug the ongoing holes in household budgets, particularly when £6billion of Universal Credit is due to be cut.”