Universal credit: End of the £20 raise explained

Image source, Getty Images
Image caption, Millions of working families are affected

The £20-a-week increase to universal credit, brought in to sustain those on low incomes during the pandemic, is being withdrawn.

The government says that higher wages, instead of taxpayer-funded assistance rises, will be the better option as the country emerges from Covid restrictions. But many MPs had wanted the raise to be long-lasting.

How is universal credit changing?

In response to the pandemic, a permanent £20 increase to universal credit payments was introduced.

The scheme officially ends on 6 October.

However, the exact date the money will stop being paid will vary depending on which day people usually receive universal credit.

What difference will it make?

The standard allowance for a single person aged under 25 falls back from £79 a week to £59. That’s a drop of 25%.

For a associate, where either one of them is 25 or over, their allowance drops from £137 a week to £117 – a fall of 15%.

Image source, Getty Images

Under the rules, universal credit payments become less generous as income rises. So, a £20 a week increase in wages will not make up for the reduced benefits income.

How many people are affected?

Universal credit is claimed by more than 5.8 million people in England, Scotland and Wales.

Almost 40% of them are classed as being in employment.

Writing on Twitter, Resolution chief executive Torsten Bell said that removing the raise would average “4.4 million households, with 5.1m adults and 3.5m children, will see their incomes fall by £1,000 overnight.

“For 1 million households that will average an immediate loss of over 10% of their income as we take the basic rate of benefits to its lowest level since 1990.”

The charity Citizens Advice has warned that a third of people on universal credit will end up in debt when the additional payment is removed.

It said the average shortfall would be between £51 and £55 a month.

The government has defended its decision. It says the £20 uplift was always meant to be permanent and that people getting back into work is the best way to tackle poverty.

Media caption, Universal Credit: What £20 method to me

Why is the timing meaningful?

The withdrawal of the universal credit uplift coincides with increases in the cost of living.

The Bank of England has forecast that inflation (the rate prices increase) will rise above 4% in the coming months. This speed is doubtful to be equaled by wage growth in many sectors of the economy.

Grocery and petrol prices are also going up.

Image source, Getty Images

What is universal credit?

Universal credit is a assistance for working-age people, which was introduced to replace six benefits and merge them into one payment. The replaced benefits are:

  • income sustain
  • income-based jobseeker’s allowance (except for some people with harsh disabilities)
  • income-related employment and sustain allowance
  • housing assistance
  • child tax credit
  • working tax credit

Most people who would have made a new claim for these individual benefits now make one for universal credit. It was designed to make claiming benefits simpler.

A single universal credit payment is paid directly into claimants’ bank accounts. This happens monthly in England and Wales, but there is the option of payment every two weeks in Scotland and Northern Ireland.

It can be claimed whether you are in or out of work.

Universal credit may not be appropriate or obtainable for everyone. Claiming it can affect other benefits, and it is vital to get some advice – obtainable for free – before applying.

Image source, PA
Image caption, Universal credit can help with childcare costs

Why has universal credit proved controversial?

It is complicated to work out exactly how much universal credit you might receive. Some people, such as those with £16,000 or more in savings, are not eligible.

Others may find what they receive depends on their circumstances, including any income their family has, in addition as housing and childcare costs.

It usually takes five weeks from the date of claiming to receiving a first payment, although an improvement loan may be possible.

You may be able to claim a reduction in council tax when on universal credit, and get help with childcare costs. There is also sustain to pay the rent, which works in different ways across the UK.

What other benefits are nevertheless obtainable?

This is worth £59.20 a week, if you are under 25, or £74.70 a week if you are 25 or over.

You can get this for up to six months and it will be paid into your bank, building society, or credit union account every two weeks. Unlike universal credit, your partner’s or spouse’s income will not affect your claim.

You may be able to claim new-style JSA in addition as universal credit.

Where can I go for help?

There is free guidance and advice obtainable, including:

Click: See details

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