I think its fair to say that up until a month ago, we would never have thought that we would need to advise clients on Universal Credit.

But as a result of the current crisis, Universal credit, which was very controversial when it was introduced, is now being promoted as the catch all by the government to smooth over the cracks of the Coronavirus support system. Basically, if you can’t get other support from the government then Universal Credit is where you need to turn.

But universal credits can be complicated and the online assessment process can take a while to go through.  The following information can be found here, but we have summarised some of the key points below and we hope you find the information useful. 

How Universal Credit payments are calculated: 

There are 3 steps to work out your Universal Credit payment. More details about each stage are below:

  1. Your household’s maximum Universal Credit amount is calculated. This will be made up of one standard amount and any additional amounts that apply to you and your household (for example, for housing costs or children).
  2. Money may then be taken off because of your earnings or other income (such as money from savings), to pay back any advances or loans you have taken out, or because arrangements have been made for money to go straight to your utility provider. If you have received a sanction, this will also reduce your Universal Credit payment.
  3. If it applies to you, the benefit cap may reduce how much you receive.

1. What makes up your payment

The Standard allowance

Part of the Universal Credit payment is a standard amount for your household. This is known as your standard allowance. Your monthly amount will depend on whether you are single or in a couple, and your age.

Housing costs

If you and/or your partner are responsible for paying rent (including some service charges) for the home you live in, or if you have a mortgage, Universal Credit may provide help towards the cost.

If you receive help towards housing costs it will be paid as part of your Universal Credit payment. It is your responsibility to make sure you pay your rent and other housing costs to your landlord in full.

If you are having trouble managing your money, you can ask to have your housing costs paid straight to your landlord. See here.

Work Allowance

If you and/or your partner are in paid work you may be able to earn a certain amount before your Universal Credit payment starts to be affected. This is called a Work Allowance.

The Work Allowance only applies to you if:

  • you have responsibility for one or more children (or qualifying young persons), or
  • you or your partner have limited capability for work (a health condition or disability)

If neither of these circumstances apply to you, your Universal Credit payments will be affected as soon as you start earning money from paid work.

There are 2 Work Allowance rates. Which one you get depends on whether your Universal Credit payment includes help with housing costs:

  • If you receive money to help with housing costs your Work Allowance will be £287 per month
  • If you do not receive money to help with housing costs your Work Allowance will be £503 per month


2. What could reduce your payment

Earnings and other income

Other money coming into your household will be taken into account when working out your Universal Credit payment.  This includes your earnings, any capital you have and any other sources of income.

You may still be able to receive Universal Credit payments when you start work or increase your earnings again. Your Universal Credit payments will adjust automatically if your earnings change, meaning you have the flexibility to take on part-time or short-term work.

As your earnings increase, your Universal Credit amount will go down, depending on your circumstances. For more information see here.

If you are part of a couple and have a joint award, then both your earnings will be used to calculate your Universal Credit payment.

If your circumstances mean that you don’t have a Work Allowance, your Universal Credit payment will be reduced by 63p for every £1 you earn.

Capital

Capital is something that could be a source of income. This includes:

  • savings, such as those in a bank or building society
  • investments such as Bonds or ISAs
  • property that you may own or part own (other than the house you live in)

When you claim Universal Credit, you will need to declare all of your capital. If your capital is worth more than £16,000 you will not be entitled to claim Universal Credit. If you are in a couple but have to make a claim as a single person, your partner’s capital/savings will still be taken into account.

Here’s how the amount of capital you have will affect your Universal Credit claim:

  • Any capital/savings you have under £6,000 is ignored.
  • Any capital/savings you have worth between £6,000 and £16,000 is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250, regardless of whether it does or not.  So, if you have £6,300 in a savings account, £6,000 of it will be ignored and the other £300 will be treated as giving you a monthly income of £8.70.
  • If you have capital/savings worth more than £16,000 you will not be entitled to Universal Credit. This is the same if you are a single claimant or are making a claim as a couple.

Other money coming into your household

This means any other money that you may receive, for example, from a pension or other benefits.

When you claim Universal Credit, you need to detail all your income from other sources as this could affect the amount of Universal Credit you receive. This includes any other benfits (like child benefit) and other taxable income.

More information is available here.

Other Deductions

Money may be taken out of your Universal Credit payment:

  • to pay back any advances or loans you have taken out
  • to pay back any debt or overpayment on other benefits
  • to pay your utility bills direct to the provider
  • for child maintenance payments

The maximum amount of money that can normally be taken out of your payment for these reasons is 30% of your standard allowance.

Your payment may also be reduced if you have received a sanction. See here.

This can be up to 100% of your standard allowance if you are claiming on your own, or up to 50% of the standard allowance for each member of a couple.

If you used to claim tax credits and you received an overpayment, this debt will be carried over to Universal Credit. Your Universal Credit payments will be reduced until the overpayment has been paid back.

Read more about debts and deductions that can be taken from Universal Credit payments here.


3. The Benefit Cap

There’s a limit on the total amount of benefit that most people aged 16 to 64 can get. This is called the benefit cap, and how much it is depending on your circumstances.

If you live outside Greater London (see here)

If you live in Greater London:

Help towards the cost of supported or sheltered accommodation isn’t counted when working out the total amount of benefit you receive.

If you are already claiming benefits and are likely to be affected by the benefit cap rules, you will already have been notified and offered support from a work coach to help you prepare for it.

The benefit cap will not apply to some people – for example, if you or your partner work more than a certain number of hours per week. Find out more about the benefit cap here.


4. Applying for Universal Credit

Applications need to be made online here. Once set up, you then use your online Universal Credit account to get in touch with the Department for Work and Pensions.

You can call the Universal Credit helpline on 0800 328 5644 to get help making your claim online or if you need help applying for an advance payment. But there are large queues to get through, as you would expect. 

Getting paid

Universal Credit is a single payment that is paid monthly, although you may have to wait for around 5 weeks for your first payment. You may be able to get a Universal Credit advance if you are unable to manage during this period (see here).

If you are having trouble managing your money you may be able to be paid more frequently, such as twice a month.

The Universal Credit payment is normally paid directly into an account in your name, such as a bank, building society or credit union account. This will need to be a current account, not a savings account. If you don’t have one, the Money Advice Service website can help you choose the account that’s right or you.

If you are part of a couple, living in the same household, and both of you are claiming Universal Credit, you will receive one monthly household payment. In exceptional circumstances a Universal Credit payment can be divided between 2 members of a household. This is known as a split payment. Contact Universal Credit or talk to your work coach to find out more.

Assessment periods

Universal Credit is assessed and paid in arrears, on a monthly basis and in a single payment. Your personal circumstances will be assessed to work out the amount of Universal Credit you will get.

Your first assessment period will start on the date that you make your claim. The assessment period will last one calendar month.

You will usually receive your first payment 7 days after the end of your first assessment period. Universal Credit will then be paid on the same date each month. Your normal pay day will be fixed at 7 days after the end of your assessment period.

If your pay day is on a weekend or bank holiday you will receive your payment earlier – usually on the last working day before that weekend or bank holiday. If that would mean there is not enough time between the end of your assessment period and the day you are paid, the Department for Work and Pensions will take action to make sure you receive your payment on time.

The amount you get will not change to take account of different numbers of days in a month.

If your payment date is on the 29th, 30th or 31st of a month and the current month has fewer days, you will be paid on the last day of the month.

Example of an assessment period

The date of your new claim is 1 September.

Your first assessment period starts on 1 September.

Your assessment period then runs for a complete calendar month from 1 September to 30 September, with a new assessment period beginning on 1 October.

You will receive your first payment on 7 October. You will receive your Universal Credit payment on the 7th of each month after that.

Changes in your circumstances during an assessment period may change your payment.

Advances

If you have made a Universal Credit claim but are unable to manage until your first payment, you may be able to get a Universal Credit advance.

The amount you can borrow will be up to your first estimated Universal Credit monthly payment.

You will need to pay back your advance a bit at a time from your future Universal Credit payments. You will usually pay your advance back over a 12 month period.

To apply for an advance payment, you’ll need to:

  • let the Department for Work and Pensions know why you need the advance
  • provide your bank details so that the money can be paid if an advance is agreed
  • have had your identity checked at the jobcentre (unless you are affected by coronavirus)
  • show that you can pay it back
  • agree to pay it back

You will usually be told if you can get an advance on the same day that you apply for it.

You can apply for an advance payment in your online account. You can also call the Universal Credit helpline or speak to your work coach.

You can only apply for an advance online if you are within your first Universal Credit assessment period and you have had an interview at the jobcentre. However, if you are affected by coronavirus you can receive up to a month’s advance up-front without physically attending a jobcentre.

You may be able to get an advance after your first assessment period if you have had a change of circumstances that means you will get a larger Universal Credit payment, but you haven’t yet received that increased amount. If you are in this situation you can apply for an advance by calling the helpline on 0800 328 5644. They are open Monday to Friday, 8am to 6pm.

Contact me today!

Josh Curties

BA (Hons) ACA

Partner & Principal Adviser

01474 853856

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