Debt charities have warned the cut to Universal Credit could plunge families below the poverty line. But when is the decrease to payments happening and what help is available?
Millions of people on Universal Credit are about to see their incomes drop as a controversial cut comes into effect from next month.
This amounts to roughly an extra £80 per month, or £1,040 over a year.
But this support is being pulled from next month, with the government so far resisting calls to keep the extra money in place.
Chancellor Rishi Sunak has said the support was only designed to be temporary, while Work and Pensions Secretary Therese Coffey this week said there are no plans to extend it.
However, debt charities have warned that the cut could plunge families below the poverty line.
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Worrying research from Save the Children shows how almost half of Universal Credit claimants don’t think they can live on £20 less each week.
We’ve also spoken to families who are concerned about the drop in payments.
This includes single mum Gemma who fears she’ll need to use her credit card to get to work, and mum-of-one Rebecca who says she may be forced to use food banks.
Here is what you need to know about the Universal Credit cut – and what help is available:
Exact date cut kicks in
The boost to Universal Credit payments will officially end on October 6 – but the exact date people will notice the cut will depend on the day they get their benefit payment.
For many, this means September will be the last month they see their Universal Credit paid at existing levels.
This is because your benefits are calculated each month based on an “assessment period” which varies for each person.
If your assessment period ends on or after October 6, you will be paid the new lower amount of Universal Credit.
What part of Universal Credit is being cut?
The cut to Universal Credit will be applied to the standard allowance.
This is the basic rate you are entitled to before any additional elements are added, and before any income, savings or other deductions are taken into account.
You may be eligible for additional elements if you look after a child, or have an illness or disability.
The amount you receive for any additional element you already claim won’t be changing in October.
Childcare costs element
Limited capability for work element (abolished for most new claimants from 3 April 2017)
Limited capability for work-related activity element (LCWRA element)
Housing costs element
Transitional amount for people who had Severe Disability Premium on their legacy benefits
The benefit cap – which is the total amount one person can receive in benefits and may reduce your Universal Credit – will also remain unchanged.
We’ve got a guide on how Universal Credit is calculated here.
New payment rates explained
Here is how the standard allowance is changing from October 6:
Joint claimants both under 25: £403.93 (from £490.60)
Joint claimants, one or both 25 or over: £509.91 (from £596.58)
How many people will be affected
The cut to Universal Credit will affect everyone who claims the benefit – so that is almost six million people.
There are 5,966,262 people receiving Universal Credit, according to the latest government figures – almost double the three million making claims before the pandemic.
While some are seeking jobs and others are unable to work, 40% of claimants are already employed.
How much you need to earn to make up £20
Due to the way Universal Credit is calculated, many people who claim the benefit will need to earn much more than an extra £20 to make up the drop in payment.
Many people are affected by the taper rate, which reduces your maximum Universal Credit award as your earnings increase.
The rate in which your Universal Credit is reduced by is 63p for every £1 earned over a certain allowance.
Claimants may also have to pay income tax and National Insurance.
Analysis for Debt Camel by benefits expert Gareth Morgan, of Ferret Information Systems, found that many people on Universal Credit will need to earn at least £54.05 extra per week – and some need to make even more than this.
This would be the case if someone has earnings below £184 a week, with no tax or National Insurance payable.
They would need to earn £54.05 extra per week to account for the 63% or £34.05 taper, leaving them with £20.
Those who apply for the work allowance – which is an amount you can earn before the taper right kicks in – would only need to earn £20 a week to replace the cut.
Help available explained
Don’t suffer in silence if you’re worried about how you’ll afford your bills once your Universal Credit has been reduced.
Citizens Advice has the following advice:
- Check what other benefits you may be entitled to by using a free online calculator tool or contacting your nearest Citizens Advice.
- Contact your local council to see what help and support they may be able to offer you.
- Talk to your bill providers as soon as possible if you’re worried you can’t meet your payments. Citizens Advice can also offer free debt advice.
- See if you’re eligible for food bank vouchers. Citizens Advice can refer you to your nearest food bank.
- If you have children, you will likely be eligible for free school meals if you claim Universal Credit.
Finally, speak to the following free organisations for debt help: