The SRC-Time Guide to Universal Credit

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For some of our self-employed clients the Coronavirus (COVID-19) pandemic will mean their first ever contact with the UK’s benefits system, as they may not qualify for assistance under the Self-Employment Income Support Scheme. We set out below a guide for first time applicants.

Do you qualify for Universal Credit?

Universal Credit is a benefit payment for people in or out of work, which replaced a number of earlier benefits and tax credits.

There are some basic eligibility requirements to claim Universal Credit, you need to meet:

  • Your self-employment business has temporarily ceased or it now generates a low income or you are unable to work as a result of COVID-19
  • you’re aged 18 or over 
  • you or your partner are under state pension age
  • you and your partner have less than £16,000 in savings
  • you live in the UK

The basics

There are some general principles which you need to know before making a claim

  • The Universal Credit includes allowances for rent, bringing up children, caring for dependents or your sickness and disability, if applicable. 
  • If you live with someone as a couple and you are both entitled to claim Universal Credit, you will get a joint payment paid into a single bank account.
  • It is paid monthly in arrears so it can take up to five weeks after you make your claim to get your first payment.
  • There are no limits on how many hours a week you can work if you’re claiming UC. Instead, the amount you get will gradually reduce as you earn more, so you won’t lose all your benefits at once.
  • You have to make your claim online. https://www.universal-credit.service.gov.uk/postcode-checker
  • If you or your partner have over £16,000 of savings, you will have to apply for Jobseeker’s Allowance (JSA) (if aged 25 or over £74.35 a week; if under 25 £58.90), and will receive no help with rent.

Pensions, Income and savings

Some income that you didn’t get from working can be deducted from your maximum award. This is called unearned income.

Unearned income that will be taken off your Universal Credit payment includes:

  • Jobseeker’s Allowance (JSA)
  • Employment and Support Allowance (ESA)
  • Pension Income
  • Some benefits that aren’t replaced by Universal Credit.

Usually £1 will be deducted from your Universal Credit payment for every £1 of unearned income.

Unearned income that won’t be taken off your Universal Credit payment includes:

  • Child Benefit
  • Maintenance payments
  • Disability Living Allowance
  • Personal Independence Payment
  • Income from boarders and lodgers.

Gross earned income or self-employed net income reduces your payment by £0.63 for every £1 earned.

If you or your partner have £6,000 (£10,000 if you are over state pension age) or less in savings this will not affect your claim. However, if you or your partner have savings between £6,000 and £16,000, the first £6,000 is ignored and the rest is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250.

How much will you get?

Basic amount

If you’re claiming Universal Credit, you will get one standard allowance for your household. The amount you will get is:

  • £342.72 per month for single claimants under 25
  • £409.89 per month for single claimants aged 25 or over
  • £488.59 per month for joint claimants both under 25
  • £594.04 per month for joint claimants with either aged 25 or over

These figures include the increase to the standard allowance because of coronavirus.

Child Element

If you’re looking after a child under the age of 16, or a qualifying young person under the age of 20, you qualify for the child element. This entitles you to:

  • £281.25 per month for first or only child born before 6 April 2017
  • £235.83 per month per child in all other circumstances.

You can only claim the child element for a maximum of two children, unless an exemption, such as a multiple birth applies, or you’ve adopted.

If your child has a long-term health condition or is disabled, additional support is available

Carer Element

If you’re caring for a severely disabled person for at least 35 hours a week, you will get £162.92 per month.

If you’re making a joint claim, with your partner you can both receive the carer’s element, but you cannot be caring for the same person.

You do not qualify for the carer element if you have any earnings from your caring responsibilities.

If you’re claiming as a single person, you will only get one carer element even if you care for more than one disabled person

Housing Element

The housing costs element for private tenants is based on the Local Housing Allowance (LHA) for where you live.

LHA is calculated on a formula for rental prices in your area for the number of rooms you need.

For example, a single claimant with no children, will have their LHA based on the average cost of renting a one bedroom flat in that area.

This means your housing costs element might not cover all your rent.

If you are paying a mortgage, you should contact your bank in the first instance as the government loan scheme Support for Mortgage Interest has a 39 week waiting period and is limited to the interest due on the first £200,000 of capital.

Cash Emergency?

If you will have little or no money until your first payment, you can request an advance payment by calling the free Universal Credit helpline. You will have to pay this money back within 12 months and the first repayment is usually taken from your first Universal Credit payment, so only ask for what you need.

Reporting requirements

You must report your self-employment earnings to the DWP every month to carry on getting Universal Credit.

If you don’t supply these figures between 7 days before and 14 days after your assessment date each month, your Universal Credit payment will be suspended.

You’ll need to do this online by inputting your actual receipts minus:

  • Income Tax
  • Permitted expenses
  • National Insurance (Class 2 and Class 4)
  • Any pension contributions qualifying for tax relief.

After the pandemic ends

You need to report changes to your circumstances, as the business environment improves, in order to keep getting the right amount each month. It is important to note that your claim might be stopped or reduced if you do not report a change of circumstances to the DWP straight away. You report a change of circumstances by signing in to your Universal Credit account.

If you’ve been paid too much, you may have to repay the money if you:

  • did not report a change straight away
  • gave wrong information
  • were overpaid by mistake

You could be taken to court or have to pay a penalty if you give wrong information or do not report a change in your circumstances.

Given the current uncertainty and climate rest assured we are here to help all our clients ensure business continuity and we hope you found this article helpful. 

Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at info@src-time.co.uk  or speak with your account manager to get any process started.

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