The government are bringing in a number of changes to the welfare system over the next few years, in what they are calling 'Welfare Reform'. We've listed below what these changes are, and how they might affect you if you claim benefits.
Many of the changes within Welfare Reform are yet to be confirmed - we will make sure that we communicate these changes with you before they happen so that you are always aware of what these changes will mean to you.
If you have any questions about Welfare Reform, we are here to support you. Visit our 'Financial Support' page to find out more about the different ways we can help you.
Benefit and Tax Credit rates frozen
The main rates of working age benefits and tax credits will be frozen in cash terms for 4 years from April 2016. Disability benefits, the disability-related elements of tax credits and statutory payments including Personal Independence Payment, Attendance Allowance, Disability Living Allowance, Employment and Support Allowance (Support Group only), Maternity Allowance, Statutory Maternity/Paternity Pay and Statutory Sick Pay, were due to be up rated in line with the Consumer Prices Index; however the Consumer Prices Index was announced to have fallen in the year to September 2015 so this means that the benefits mentioned above will not be increased from April 2016.
Benefit cap reduced
There is currently a benefit cap in place restricting the amount in certain benefits that a working age household can receive. Any household receiving more than the cap has their Housing Benefit reduced to bring them back within the limit.
The cap which is currently £26,000 per year is to be reduced to £23,000 for households living in London and to £20,000 for those outside London from autumn 2016, when exactly is not known at present.
Housing Benefit changes
The withdrawal of the family premium in Housing Benefit (£17.45 when a claimant has one or more dependant children) will take effect from 1 May 2016, a year earlier than the reductions for children within Child Tax Credit. Removal of the family premium will affect both new claims and new births from 1 May 2016.
Housing Benefit backdating will be reduced so that new claims from working age claimants will be backdated for a maximum of four weeks. Currently, if you are working age, your Housing Benefit claim can be backdated for up to six months if you can show good cause for making a late claim and you would have qualified for the benefit sooner.
Tax credit allowance and taper cut
On 25th November 2015 during the Chancellor's combined Autumn Statement and Spending Review, he announced that the widely unpopular planned tax credit changes (reduced income threshold and increased taper rate), which would have meant that any working household receiving tax credits with an annual income of more than £3,850 a year would be worse off, would in fact not be going ahead.
Tax credit income disregard cut
At the moment, if your household income increases by up to £5,000 during the tax year this increase is ignored when calculating your entitlement for that year. From April 2016 this will be reduced so that any increase in income of more than £2,500 will be taken into account. According to the Treasury, it is estimated that 800,000 people will see their entitlement to tax credits reduced by an average of £200-£300 per year due to this cut which brings the 'income rise disregard' back to the same level it was when tax credits were first introduced.
Universal Credit changes
The work allowance in Universal Credit, the amount you can earn without your benefit being affected, will be reduced from April 2016. For disabled people and people with children it will be reduced to £192 per month if you have housing costs and £397 per month if you don’t have housing costs. The work allowance will be abolished altogether from April 2016 for non-disabled, childless claimants meaning your benefit is reduced as soon as you start earning.
The Childcare Costs element of Universal Credit currently pays for 70% of your registered childcare costs up to a monthly limit of £532 for one child or £912 for two or more children.
From 11 April 2016, this will increase so that you will be able to claim back up to 85% of your paid out childcare costs up to a monthly limit of £646 for one child or £1108 for two or more children.
National Minimum Wage increased
The National Minimum Wage will be 'rebranded' as the National Living Wage and will be increased to £7.20 per hour for those 25 or over from April 2016. It will reach £9.00 per hour by 2020.
Personal tax allowance increased
The Personal Tax Allowance, the amount you can earn before paying income tax, will be increased from £10,600 to £11,000 from April 2016 and will increase to £11,500 from April 2017. It will be further increased to £12,500 by 2020 and thereafter it will automatically be set at the same level as 30 times the National Living Wage (National Minimum Wage).
You could get Carer’s Credit if you’re caring for someone for at least 20 hours a week. Carer’s Credit is a National Insurance credit that helps with gaps in your National Insurance record. This means you can continue to be a carer without it effecting your ability to claim benefits. You can find more information about Carers Credit on the Government website.
The Money Advice Service have put together a digital savings calculator that you can use to work out how well you're budgeting currently! It will also give you pointers on how you can improve your budgeting.