Implementation of Universal Credit from October 2013

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The current complex system of working-age benefits and Tax Credits is to be gradually replaced by a new benefit called Universal Credit. The process of moving existing claimants on to Universal Credit should be completed by October 2017.

From 2013/2014 Universal Credit will replace Income Support, Income Based Jobseekers Allowance, Income Related Employment Support Allowance, Housing Benefit, Child Tax Credit and Working Tax Credit.

The following benefits will remain outside of Universal Credit (this is subject to change) –

Council Tax Benefit (soon to be known as Council Tax Support), Carers Allowance, Contribution based Job Seekers Allowance and Employment and Support Allowance, Disability living Allowance (soon to be known as Personal Independence Payment), Child Benefit, Social Fund, Statutory Sick Pay, Statutory Maternity Pay, Maternity Allowance, Industrial Injuries Disablement Allowance and Bereavement Benefits.

It is not known as yet about the entitlement to Free School Meals and Free Prescriptions.

An award of universal credit is calculated as a basic allowance for either a single person or couple plus additional amounts for:

  • each child or qualifying young person for whom you are responsible (with extra additions if they are disabled)
  • child care costs
  • claimants with a ‘limited capability for work’
  • claimants with regular and substantial caring responsibilities for a severely disabled person
  • housing costs (mortgage interest payments for unemployed claimants and rent payments)

You will get the full allowance possible if your household has no other income and has less than £6000 savings.

There will be no award if your savings are over £16,000.

Earned Income (after disregards are applied) will reduce Universal Credit by a ‘taper rate’ of 65% (or 76% after tax and NI) which means households keep 35p in every £1.

Unearned Income will reduce Universal Credit by a 100% taper rate, that is for every £1 or unearned income, Universal Credit will reduce by £1.

There will be one payment per household, paid monthly.

Timeline for Replacement of Housing Benefit

The transition will take place in 3 phases over four years between 2013 and 2017.

  • October 2013 to April 2014

500,000 people making new claims for the benefits Universal Credit replaces will get Universal Credit instead. Please note this is for customers who are out of work

500,000 existing claimants (and their partners and dependants) will move on to Universal Credit as and when they have a significant change of circumstances, such as starting a new job or when a child is born.

  • From April 2014

New claims for people who are working will move to universal credit fromApril 2014..

  • From the end of 2015 – the end of 2017

Around 3 million households will be phased transferred to Universal Credit by local authority boundary as the old benefit system winds down.

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