Transitional Element where the indicative UC amount is nil due to earnings

Can anyone clarify for me the exact meaning of “if the indicative UC amount is nil, the total legacy amount plus any amount by which the income which fell to be deducted in accordance with section 8(3) of the Act exceeded the maximum amount”

My interpretation of this was that you add together the total legacy benefit amount plus the amount of earnings (after work allowance and 55% taper are applied) and then subtract the maximum UC entitlement from this?

However, i did a few hypothetical calculations based on this and often they were ending up with a transitional element that was actually higher than what their total legacy amount was? Can that be right?

That is correct. The transitional element is supposed to be higher in these circumstances. That is the only way the final entitlement will end up being equal to the total legacy amount.

I too found this counter-intuitive when I first read the regs, but after doing a test calculation I saw that it works out perfectly.  Remember that the transitional element is part of the maximum UC amount before the income taper is applied, it is not a supplement added to the UC award - so the income taper brings the award down to an amount that is equal to the legacy benefits.

Thank you both.

Did a hypothetical calculation there where the legacy benefit amount was £50 per month, the earnings after work allowance and taper were £1852.95 per month, and the maximum UC entitlement was £1117.98 per month. Indicative UC award is zero.

Can you confirm just how i’d calculate that?

Is it add together £1852.95 and £50 (£1902.95)
Then subtract £1117.98 (£784.97)
Then add 784.97 and 1117.98 (1902.95)
and voila, it’s £50 per month more than the excess earnings

Or is that too convoluted a way of working it out? Can i skip any of those steps?

Step 3 reverses Step 2 in that sequence, but in substance it gets to the right conclusion.

I would do it in this order:
- surplus income above max UC amount = 734.97
- legacy amount = 50
- therefore transitional element = 784.97

Max UC in AP1 is normal elements of 1117.98 plus transitional element 784.97 = 1902.95
Deduct income taper 1852.95
UC award = 50

What you said but in a different sequence!

Thank you again for this. Has begun to make sense!

sorry i want to jump on this thread rather than start a new one as half the question was answered here

so the wages one great - kinda of understand this bit but

I have a tenant that she works full time, husband is a carer and gets CA, 2 child one gets DLA - so as it stands they currently receive child and working tax credits - they also have over £16k in savings as they have just had an inheritance

my understanding is that the capital would be disregarded for 12 MAPS and then after that it would be taken into account but reading the regulations (if im reading it correctly) says that if during any point of this 12MAP it drops below 16k then the disregard will no longer apply?

am i reading that right so if they needed to pay for something and it pushes them to under 16k does the normal calculation for UC kick in and the trans disregard no longer applies?

Oh dear…..first venture into this territory. Am I anywhere near getting this right?

1/ Single WTC claimant, gets PIP
Total legacy amount £310 a month.
Work income means Indicative UC would be nil (no disability elements etc)
UC is single person £368.74
Monthly net income £1174.14 (apply taper – £645.78)
- surplus income above max UC amount = £277.04 (£645.78 - £368.74)
- legacy amount = £310.00
- transitional element = £277.04 + £310.00 = 587.04
Max UC in AP1 is single person plus transitional element 368.74+587.04= £955.78
Deduct income taper £645.78
UC award = £310.00, which is all ‘transitional’

2/ What if there is capital of, say, £10,000? Does this appear in the UC indicative amount calculation or quite where?

3/ Was recognised as disabled under WTC but not in UC.
Would need to request WCA (and ask for fit notes, although already working)

If claimant got LCW , would gain no additional element but would get work allowance – UC of about £70 month – is this payable with the existing award and doesn’t erode it,  as no new elements awarded?

TE will be wiped out if claimant gets LCWRA element but would make a net gain £150.11 a month?

4/ While WCA goes on, without a carefully drawn up Claimant Commitment to show working to the fullest possible extent,, claimant will come under possible pressure to do additional work etc etc

#1 - seems correct.

#2 - you would just add in tariff income to both the indicative UC amount and the actual UC amount so it just cancels out.

#3 - if there is no new element or increase in an existing element, there is no TE erosion. However it may be necessary to recalculate the TE if the Work Allowance is being applied from the start of the claim. The introduction of the LCWRA element would erode the TE to nil, yes, but then your client is in a substantially better position than they were on legacy so all is well.

#4 - is, I think, a comment rather than a question, but if he is both working and putting in fit notes, then it is hard to imagine that he will be required to do very much.

Elliot Kent - 20 September 2023 01:06 PM

#1 - seems correct.

#2 - you would just add in tariff income to both the indicative UC amount and the actual UC amount so it just cancels out.

#3 - if there is no new element or increase in an existing element, there is no TE erosion. However it may be necessary to recalculate the TE if the Work Allowance is being applied from the start of the claim. The introduction of the LCWRA element would erode the TE to nil, yes, but then your client is in a substantially better position than they were on legacy so all is well.

#4 - is, I think, a comment rather than a question, but if he is both working and putting in fit notes, then it is hard to imagine that he will be required to do very much.

Mostly agree with this, but on #2 I would add that the transitional element will also be higher.

On #3, I don’t think the TE will be recalculated, as the indicative UC amount is based on the circumstances a day prior to the UC claim, so even if the work allowance is backdated, it shouldn’t actually affect the indicative UC amount.

I agree with Charles

#2 I think the TE would be higher because the Regs say ‘any amount by which the income which fell to be deducted in accordance with section 8(3) of the Act’ which includes tariff income

#3 Addition of a work allowance isn’t cause by an error / misrepresentation / change to legacy benefit so I don’t think it comes under the Reg that allows them to recalculate the TE

On the maths -
Looks right to me - my only comment would be that there’s a good chance that the income used for the TE won’t be the same as the net monthly income they’re actually receiving because the DWP will get the annual figure held by HMRC. So the actual TE amount might be a bit different to that - but the maths is good!

Many thanks to all.

Nobody has ever before, in 60 years, said ‘the maths is good’ with regard to any of my efforts…..

Charles - 20 September 2023 01:43 PM

Mostly agree with this, but on #2 I would add that the transitional element will also be higher.

On #3, I don’t think the TE will be recalculated, as the indicative UC amount is based on the circumstances a day prior to the UC claim, so even if the work allowance is backdated, it shouldn’t actually affect the indicative UC amount.

#2 - that is what I had meant (whether or not it is what I had said…) - capital in excess of £16k is dealt with by the special disregard, but capital below £16k is dealt with naturally by the process of calculating the transitional element

#3 - Yes, quite - I had been thinking that the backdating of any of this would be effective from the start of the claim but as we are looking at the day before it won’t matter.