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Universal Credit (UC) - A Guide

A guide to Universal Credit an allowance for people of working age, whether
they are in or out of work and includes disabled people

See also: Universal Credit - Benefit Rates 2019 to 2020 and 2018 to 2019

The Government says that Universal Credit, replacing certain other benefits will help claimants
(including disabled people) and their families to become more independent and will simplify
the benefits system by bringing together a range of working-age benefits into a
single streamlined payment.


Universal Credit is based on a standard allowance to which the following elements can be added for households which meet the criteria:
limited capability for work/limited capability for work-related activity elements;
child element;
disabled child addition;
childcare costs element;
housing costs element;
and carer element.

The introduction of Universal Credit is complex and we see problems and anxiety arising for many claimants.

The Benefits it will replace are:

1. Income Support
2. Child Tax Credits
3. Housing Benefit
4. Income-based Jobseeker's Allowance (JSA)
5. Income-based Employment and Support Allowance (ESA)
6 .Budgeting Loans and Crisis Loans

Note: Universal Credit won't replace Child Benefit.

How is Universal Credit Different:

  • Universal Credit will be available to people who are in work and on a low income, as well as to those who are out of work
  • most people will apply online and manage their claim through an online account
  • Universal Credit will be responsive, as people on low incomes move in and out of work
  • they'll get ongoing support - giving people more incentive to work for any period of time that is available
  • most claimants on low incomes will still be paid Universal Credit when they first start a new job or increase their part-time hours
  • claimants will receive just one monthly payment, paid into a bank account in the same way as a monthly salary
  • support with housing costs will go direct to the claimant as part of their monthly payment.

The Effect on other Benefits

The National Launch

From April 2014, all new claims will be for Universal Credit.

Existing claimants: They will move onto Universal Credit in line with a phased approach the government expect to have completed by the end of 2017.

What will claimants be expected to do in return for Universal Credit

At the heart of Universal Credit is a partnership between the state and the claimant. In return for receiving financial support, out of work claimants, depending on their circumstances, must look for work, or take steps towards it. This may include preparing a CV, attending training courses, applying for suggested vacancies or registering with a recruitment agency. In most cases they must also be available and willing to immediately take up work and attend periodic interviews to discuss plans and opportunities for returning to work (immediately or in the future). To demonstrate that they take this responsibility seriously, out of work claimants must accept a claimant commitment. If a claimant refuses to accept their claimant commitment, they will not be entitled to Universal Credit. If the claimant doesn't do what he or she has committed to do, they will experience tougher penalties than at present, such as their benefit being reduced or withdrawn for up to three years. The details of these penalties are currently being defined. For some out of work claimants, this will not be the case. For example, there are groups who will continue to get support and not be expected to work or prepare for work over a sustained period. Examples of such groups are:

  • claimants with limited capability for work related activity
  • claimants who are in receipt of the Carer’s element
  • claimants who are not in receipt of the Carer’s element but who do have caring responsibilities of at least 35 hours in a week for a severely disabled person/s
  • a lone parent with a child under the age of one year.

This list is not exhaustive. Universal Credit can be payable to people that are in low paid work and will top up their earnings. The amount of their Universal Credit will reduce at a consistent and managed rate as they increase their working hours and earnings. This will continue to be the case until they are self-sufficient. Claimants who are in work must also accept a claimant commitment according to their circumstances clearly setting out what is expected of them in return for Universal Credit. They will need to log on to the online gateway to submit their Universal Credit claim. They will also need to tell us about changes to their circumstances, which affect their entitlement to benefit, or the conditions they must meet. Their Universal Credit will be calculated and delivered electronically and automatically adjusted each month in line with earnings. Claimants will be able to clearly seeing the benefits of increasing their hours and therefore their earnings.

Claiming Universal Credit

You will usually have to be aged 18 or over to make a claim for universal credit. Young people under 18, students and people from abroad or not usually resident in the UK will not usually be able to claim, but there will be some exceptions. You won't be able to claim universal credit if both you and your partner are over pension credit age, you'll have to claim pension credit instead. You will be able to claim as an individual or jointly as a couple. Most claims for universal credit will be made online, and it is expected that people will tell the DWP about changes in circumstances online too. You will not be entitled to universal credit if your income from other sources or savings are too high for you to qualify.

For claimants who cannot get online or use a computer

Universal Credit has been designed so that claimants can personally manage their claim directly through an online account. However, claimants who cannot access the internet or use a computer will be helped to complete their online claim for Universal Credit. This may be in a high street outlet or via a telephone service. For claimants who require a little bit more support, face to face help and a one to one telephone service will be available and an adviser will complete an online form on the claimant’s behalf, checking for accuracy as they proceed.

To further assist claimants, ‘Digital Champions’ are already in every Jobcentre, and will help staff support and encourage claimants to take their first steps online and see the benefits of being able to use the internet.

How is a Universal Credit payment is calculated and what does it include

Universal Credit is made up of a standard allowance and potentially five elements, as any award is based on a claimant’s personal circumstances. The five elements are:

  • Child Element / Disabled Child Additions
  • Childcare Element
  • Carer Element
  • Limited Capability for Work Element
  • Housing Element

The monthly Universal Credit payment covers everyone in a family who qualifies for support. This may be

  • a person claiming for themselves alone
  • a person claiming for themselves and their child or children
  • a couple making a joint claim for themselves
  • a couple making a joint claim for themselves and their child or children

Children over 18 living with their parents or siblings can claim Universal Credit in their own right.

Monthly Payments

Universal Credit is paid monthly to help people budget effectively and reflect the world of work, where 75% of all employees receive wages monthly. This will help smooth the transition into monthly paid work, encourage claimants to take personal responsibility for their finances and to budget on a monthly basis which could save households money. For example, monthly direct debits for household bills are often cheaper than more frequent billing options. The Government is exploring access to financial products for those on low incomes and is working with providers of financial services, the British Bankers and Building Society Associations, credit unions and the Post Office to help people budget effectively with a monthly payment.

Supporting those moving into work or increasing their hours

Universal Credit will make it easier and less worrying for claimants to try out a job or work more hours, because their benefits will not automatically stop if they do so. The new system will show people that they will be better off working. Universal Credit will ensure that work pays. Financial support will be reduced at a steady rate, taking actual earnings into account at the time they are received. If a claimant is working part time, they may continue to receive some payment, but if their hours then increase, their Universal Credit payment will reduce, but they will keep more of their earnings and will always be financially better off in work. The government want to make sure people are encouraged to take work whether it is full or part time, or to increase their hours and see the benefit of doing so. For claimants on Pay as Your Earn (PAYE), Her Majesty’s Revenue and Customs online employer system will automatically pass information about their earnings to their Universal Credit account. This means that the claimant won’t need to tell about every change in their earnings. They will see the positive impact of increased hours directly on their online account as they will keep more of their earnings.

Child Support

This will be provided in the form of a child element. It will be included included in a claimant’s Universal Credit award where they are responsible for a child or qualifying young person that normally lives with them. The child element is comprised of two rates; one rate for the first/only child and then a reduced rate for second / subsequent children. Universal Credit will provide more support for childcare costs. Under current tax credit rules, support towards childcare costs is only available to parents who work more than 16 hours per week. Under Universal Credit, this requirement will be removed and support will be available to parents regardless of the number of hours they work. This will provide an important financial incentive to those taking their first steps into paid employment. It will mean that around 80,000 extra families will be eligible to receive support through childcare. Universal Credit is expected to be particularly beneficial to lone parents, including those who wish to work a small number of hours.

Groups needing more support

The government is working with stakeholder organisations and claimants to ensure that Universal Credit is designed and delivered to meet the diverse needs of all potential claimants. Some of the options that they are exploring for the 40 groups identified as having higher support needs are as follows:

  • making the online service accessible
  • tailoring our requirements to individual needs
  • providing budgeting support
  • applying policy appropriately in relation to groups with higher support needs
  • providing face to face support
  • enabling third parties to support claimants.

Effect on Pension Credit

Under the existing system, people over the qualifying age for Pension Credit can also receive Housing Benefit and Tax Credits but from around a year after the launch of Universal Credit, they will no longer be able to apply for these benefits. At this point, Pension Credit will be changed to include:

  • a new element called Housing Credit, for pensioners who are eligible for support with rent
  • an additional amount for dependent children in the Guarantee Credit element.

Effect on Disability Element of Working Tax Credit

Under Universal Credit any person requiring additional support due to a disability will have to take the Work Capability Assessment. Anyone found fit for work will receive no extra financial help through Universal Credit.

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