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Universal credit changes announced in yesterday’s budget

Tuesday 30th October 2018

Numbers -money -calculating -calculation

In his budget statement, the Chancellor has announced several changes to the Universal Credit system - including more generous work allowances for working parents. This included:

  • Universal Credit work allowances (i.e. the amount of a parent or disabled person's earnings that are ignored) will increase by £1,000 per year from April 2019.
  • Allowing those in receipt of income support, income-based jobseeker's allowance and income-related employment and support allowance to continue to receive those benefits in the first two weeks after their move onto universal credit. This won't apply until July 2020.
  • Reducing the maximum amount that can be deducted from Universal Credit for debt repayments from 40% of an award to 30%.
  • Extending the time period over which an advance payment of Universal Credit is recovered from 12 to 16 months. This means smaller repayments over a longer period.
  • Changes to the rules to help self-employed people transferring onto Universal Credit. There will be a 12 month period before the Minimum Income Floor (MIF) is applied to a self-employed person's income. The MIF is an assumed minimum amount of earnings that is applied to some self-employed people even if they have little or no actual profit. This 12 month delay will be introduced from July 2019 to those who are moved onto Universal Credit under managed migration and from Sept 2020 for those who move onto Universal Credit because of a change of circumstances.
  • Allowing the 'relevant threshold' for calculating surplus earnings to remain at the universal credit nil threshold plus £2,500. If your earnings mean that your universal credit award is reduced to zero, it is possible for some of your 'surplus earnings' in that month to be carried over and counted as earnings in the following month. However you are only treated as having surplus earnings if your earnings are at least £2500 above the income level at which your universal credit would drop to zero. This will now continue to be the case until 2020 when the threshold will reduce from £2500 to £300.

The budget statement also makes clear that the timetable for the managed migration of existing claimants onto Universal Credit will be delayed slightly. While the process is still planned to begin in July 2019 it will not now complete to December 2023 at the earliest.

The budget also confirmed previously announced changes including:

  • Protecting disabled adults who receive a payment called the severe disability premium from moving onto Universal Credit.
  • Exempting kinship carers and adoptive parents from the two child limit.
  • Reinstating Universal Credit housing payments to 18-21 year old renters.
  • The introduction in April 2020 of a new statutory entitlement to two weeks paid leave for employees who suffer the death of a child under the age of 18, or a still birth after 24 weeks of pregnancy.

Contact's response to the budget

In yesterday's budget the Chancellor announced an increase in Universal Credit work allowances alongside some  temporary extra help for claimants migrating onto Universal Credit. This means that from April 2019 there will be an increase in the amount of earnings that are ignored when working out how much universal credit a working parent will get.

While this is welcome news for working families, Contact is disappointed that the government has not acted to scrap cuts to payments for disabled children under Universal Credit.

Contact's welfare rights specialist Derek Sinclair said: "Contact is extremely disappointed that the government has failed to reverse the £175 million cut to child disability payments under Universal Credit.

"While more generous work allowances announced in the budget are to be welcomed, it will be outweighed by cuts in the lower child disability addition, leaving thousands of families with disabled children worse off by more the £1750 per year under Universal Credit.  

"Current proposals do little to protect families worse off as a results of cuts to the lower child disability addition. We are dismayed that the government is going ahead with a scheme that will cause more stress and hardship for those caring for a disabled child.  

"If the government really wants to make Universal Credit fit for purpose it must start by scrapping the cuts to child disability payments that will leave more than 100,000 families worse off by more than £1750 per year."