Universal tax credit

Universal credit – an introduction 

Universal Credit is a new simpler, single monthly payment for people looking for work or on a low income. It will replace some of the benefits and tax credits you might be getting now. 

What is Universal credit?

Universal Credit is a new simpler, single monthly payment for people in or out of work, which merges together some of the benefits and tax credits that you might be getting now.
Universal Credit will replace:

• Income-based Jobseeker's Allowance
• Income-related Employment and Support Allowance
• Income Support
• Child Tax Credit
• Working Tax Credit
• Housing Benefit 

If you're on a low income, you will probably still get Universal Credit when you first start a new job or increase your part-time hours.

Your Universal Credit won't suddenly be taken away, but steadily withdrawn as your earnings increase. This means that you will be better off for every additional hour you work.

All Universal Credit claimants will have a claimant commitment which clearly sets out your responsibilities and the consequences if you fail to meet them.  

What’s different about Universal credit?

Universal Credit will be paid in a different way to current benefits:

• it will be paid monthly into an account you choose
• if you and your partner are both eligible, you will get one monthly payment for the household
• if you get help with your rent, this will be included in your monthly payment – you’ll then pay your landlord yourself 

Universal Credit will generally be managed online. You can make your claim online, then check on your payments and updates through your online account. 

When does Universal credit start?

Universal Credit will be introduced in stages between October 2013 and 2017, although it will start for some people in selected areas from April 2013.

April 2013 - Universal Credit begins in selected areas of Oldham, Tameside, Warrington and Wigan.

October 2013 - The national introduction of Universal Credit begins as groups of newly unemployed will be able to make their claim. Claims for existing benefits and credits will be gradually phased out.

From spring 2014 - Universal Credit will expand to accept new claims from people who are in work as claims to tax credits are closed down. Current benefit claimants will be moved onto Universal Credit in a phased approach.

2017 - Universal Credit roll-out complete. 

Changes to other benefits in 2013

There will be some important changes to a number of other benefits in 2013.

• Disability Living Allowance will be replaced by Personal Independence Payment from 2013.
• Council Tax Benefit will be abolished in April 2013 and replaced by a system of localised support.
• Pension Credit will be amended from October 2014 to include help with eligible rent and dependent children.
• Social Fund is also being reformed to introduce new local assistance.
• A cap on the total amount of benefits that can be claimed will be introduced in April 2013.

If you are interested in how the Universal tax credit work and would like to know more, be sure to get in touch.

Mark

Tax credits

For people who are struggling to make ends meet on low incomes, the government can provide tax credits to supplement your income.

These tax credits come in two types. These are Child tax credits and Working tax credits.

Child tax credits.

As the name suggests these credits are available to families and parents, the purpose of these tax credits is to help with the expenses of raising a family.

To be eligible for child tax credits you must be responsible for at least one child.

Child tax credits are made up of the following:

The Child Tax Credit elements	What it means	Current maximum yearly amount
Family element - the basic element	It's the basic payment if you are responsible for one or more children.	£545
Child element	This is paid for each of your children. It is paid on top of the basic family element.	£2,690
Disabled child element	This is an extra payment for each disabled child you have.	£2,950
Severely disabled child element	This is an extra payment for each severely disabled child you have.  It is paid on top of any disability element.	£1,190

As you can see, you get a basic amount, followed by a payment per child and then an additional amount if your children are disabled.

However if your earnings exceed £15,860 your tax credits will be reduced at a rate of 41% of the amount you are earning above £15,860, for example if you earn £16,860 you will lose £410 of your tax credits being 41% of the £1,000 above the threshold.

Working tax credits

These tax credits are available to those on low income, but are also working.

To be eligible for working tax credits, you must be working 30 or more hours per week if you’re at least 25 or more than 16 hours per week if you’re at least 16 and have a child or are disabled. However, for a couple with children, you must total 24 hours a week between you, with one of you working at least 16 hours per week.

They are made up of the following:

The elements	Who it applies to	Current maximum yearly amount
Basic element	The basic amount if you qualify for Working Tax Credit.	£1,920
Couples	Paid if you make a joint claim and is on top of the basic element.	£1,950
Lone parent element	Paid if you're a single parent bringing up children on your own. It is paid on top of the basic element.	£1,950
30 hour element	An extra payment if you work at least 30 hours a week.  It also applies if you're in a couple, with at least one child, and you work at least 30 hours a week between you. But one of you needs to work at least 16 hours or more a week.	£790
Disability element	An extra payment if you work and have a disability.	£2,790
Severe disability element	An extra payment if you work and have a severe disability. If you're in a couple, the person with the severe disability doesn't have to be working - as long as one of you is.	£1,190
Childcare element	An extra payment if you pay registered or approved childcare.	Up to 70% of your costs, subject to a maximum limit as follows: ·                     £175 per week if you're paying for one child ·                     £300 per week if you're paying for two or more children

As you can see you have a basic amount that depends on whether or not you are single or have children, followed by an extra amount if you work more than 30 hours per week then disability and help paying for childcare while you are out working.

The limit before you start losing working tax credits is less generous than for child tax credits, with you only having to earn over £6,420 before you start losing tax credits.

If you are in receipt of both working and child tax credits you would use the lower limit of £6,420 before you start losing tax credits.

For example if you were a single parent with 1 child working 16 hours per week at the minimum wage of £6.08 per hour, you would be entitled to the £545 family allowance, £2,690 for having a child, £1,920 for the basic working tax credit and a lone parent allowance of £1,950. This adds up to a total of £7,105 tax credits per year, and your employment would be earning £5,059 per annum, which is low enough to retain all of your tax credits.

To claim tax credits you will need to fill in a claim form that can be received by calling the tax credits helpline on 0345 300 3900 but the form must be complete and sent back between the 5^th April and 31^st July to be eligible.

If you require any assistance with the above, or need some more information, be sure to call me on 01761 436436.

Mark.