Seven changes to Universal Credit and benefits in the budget revealed – what you need to know
CHANCELLOR Rishi Sunak today revealed what changes will be made to Universal Credit in his 2021 budget.
Here’s all you need to know about the changes – and how it might affect the way you get paid.
What are the Universal Credit changes in budget 2021?
Taper Rate cut
In a win for The Sun’s Make Universal Credit Work campaign, the Treasury has made a change to UC that allows workers to keep more of the money they earn and incentivise people to take on extra work.
It means that payments will be reduced by 55p for every £1 earned over the work allowance, down 8% from 63p.
It means on average working Brits on Universal Credit will get to keep £1,000 more of their wages.
Initially, it was rumoured that the chancellor would cut the taper rate down to 60p in the Budget – but it’s now 5p lower than this.
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A taper rate cut of 60p was predicted to make 1.7million households better off, according to The Joseph Rowntree Foundation.
It is expected the even lower taper rate of 55p will now benefit two million cash-strapped Brits.
Read our Budget 2021 live blog for live updates
This will help to soften the blow for the lowest paid ahead of a tough winter while families are being battered by soaring energy, food and fuel costs.
It will also help to give claimants more support after the £20 weekly uplift to Universal Credit payments was slashed earlier this month.
The government introduced a £20 a week raise to help claimants through the coronavirus pandemic, but it was scrapped on October 6.
The Budget at a glance:
- Beer prices cut from tonight as Rishi Sunak promises cheaper wine in alcohol duty shake-up
- Major boost for struggling pubs as business rates are SLASHED giving hope to British boozers
- Long haul holidays to get more expensive but Air Passenger Duty is slashed on domestic flights
- Wage boost for millions of public sector workers as pay freeze scrapped
- Minimum wage rises to £9.50 in bumper news for 2million Brits
- £435million crime blitz confirmed including help for rape victims and more CCTV
- Massive Universal Credit shake-up means 2million can keep an extra £1,000 a year
- Cost of pack of cigarettes to go up to £13.60 from 6pm TONIGHT as Chancellor hikes tobacco tax
- Free school meals for millions of pupils and boot camps for kids as Rishi Sunak unveils £3bn skills revolution
- Rishi Sunak announces £11.5bn to build 180,000 affordable homes including 160,000 new homes on brownfield land
- Fuel duty increase to be SCRAPPED in victory for The Sun’s Keep It Down campaign
Joseph Rowntree Foundation estimated that 5.5million families lost out on the axed £1,000 boost a year, with £440million in total wiped off monthly incomes.
What is the taper rate?
The Universal Credit taper rate currently taxes Brits 63p in the pound on anything they earn over their base level of benefits.
It kicks in once claimants are earning above their Work Allowance – which is the amount of money you can earn before your Universal Credit payments are subject to being cut under the taper rate.
So you’ll lose 63p of your maximum Universal Credit award payment for every £1 you earn over your Work Allowance.
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Your Work Allowance if affected by whether you claim the Housing Costs element of Universal Credit.
The monthly Work Allowance is set at £293 if your Universal Credit includes Housing Support, and £515 if it doesn’t.
If you’re subject to the taper rate, then your payments will be deducted automatically.
The taper rate puts thousands of claimants off applying for better paid jobs or taking on more hours.
Working allowance changes
The working allowance is the amount of money you can earn before your Universal Credit payments are subject to being cut under the taper rate.
Rishi Sunak said that he would be increasing work allowances by £500 a year by December 1.
It means that households with children or with a family member with a limited capacity for work will be able to hold onto more of their cash.
The government said 1.9million households would benefit from the changes, along with the change in taper rate.
Extending surplus earnings threshold
Hidden in the budget documents, the government has announced it will extend the increase in the Universal Credit surplus earnings threshold to April 2023.
Surplus earnings are taken into account in your next monthly assessment period for Universal Credit.
For example, if your monthly earnings are more than £2,500 over where your payment stopped – the current threshold – this becomes “surplus earnings”.
These surplus earnings are then carried forward to the following month, where they count towards your earnings.
If your regular income and surplus earnings are then still over the amount where your payment stops, your Universal Credit payment will be affected.
The threshold was originally set to return to £300 in April 2022, but this has been extended to 2023 in Mr Sunak’s budget today.
Minimum wage boost
Mr Sunak boosted millions of workers’ pay packets in the Budget today.
He increased the minimum wage from the current £8.91 to £9.50 an hour.
It will come into force from April 1 next year, and works out at an extra £1,073.80 per year.
This is not a direct change to the way you get your Universal Credit – or other benefits.
But it’s worth noting it is roughly the same amount of money that Brits claiming Universal Credit were receiving under the £20 a week uplift which was axed earlier this month.
It means that Brits on these benefits might feel less of a pinch now the £20 uplift – which was a lifeline to many – has ended.
He also won’t increase fuel duty as record breaking fuel prices have forced him to ditch a 2.84p rise.
Plus, Mr Sunak will unfreeze public sector pay in a boost to frontline workers, NHS staff, teachers and civil servants.
What are the other benefit changes?
There were also changes to other benefits outlined in the budget documents, including pension changes.
We take a look at what they mean for you.
Employment Support Allowance (ESA) changes
People who are ill or disabled can apply for ESA help, and you could get up to £74.70 a week.
When Covid hit, the government made tweaks to the benefit allowing those eligible to make a claim from the first day they were absent from work – instead of the usual eighth.
Budget documents reveal that this rule will be kept in place until March 24, 2022.
You’re eligible for ESA if you’re under State Pension age and you have a disability or health condition that affects how much you can work.
You need to have worked either as a self-employed worker or as an employee, and you can’t get ESA if you claim Jobseeker’s Allowance or Statutory Sick Pay.
Terminally ill can fast-track benefits
The government has rolled out changes that mean those who are terminally ill can get cash faster.
Currently, people who are reasonably expected to have six months left can fast track their application to get the benefits they need.
This will increase to 12 months – meaning eligible claimants will get more help getting by in the final year of their life.
PIP payment assessments
The budget documents outlined that PIP claimants will not have to be assessed every 18 months to be awarded the benefit.
The DWP proposed that it was considering assessing Brits claiming Personal Independence Payments (PIP) every 18 months – after which point they would then be reassessed to see if they should continue getting payments.
But in July, it announced it would be looking at alternatives to this idea.
The government today confirmed that this change would not go ahead, and would focus on trying to “simplify the process” for those with severe life-long disabilities or health conditions.
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