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New UC rates compared with legacy benefit rates
I’ve been doing a few “better off” calculations on the new rates, and it looks as if in the majority of cases, where there would have been very little difference before they are now significantly better off on UC. (Obviously there are circumstances, involving disabled children etc where this is not the case, but in many of the “run of the mill” cases there is a big difference). This is because the Applicable Amount figure for HB, ESA, Income Support and JSA has hardly risen at all as opposed to the £100 a month rise in personal allowance in UC. But both the £100 a month rise and the removal of the Minimum Income Floor are explicitly only for 12 months. Its obviously nearly impossible for people already stretched to resist the extra money now and there will probably be huge numbers moving off legacy benefits over the next few months, but will there be a problem next April? Its easy to imagine the MIF being reinstated - less easy to imagine the rate in UC being moved down, rather than up or frozen in the future, but not impossible. What do other advisors think?
Worth noting that the legislation only allows for the MIF to be removed until November. And even that is not guaranteed, but up to the SoS’s discretion.
Also, the increased UC rates are explicitly only for this year - see paragraph (2) here. Certainly sounds like they expect to lower it.
For those on WTC paying rent, the HB higher working hours plus increase, from £17.10 to £37.10, lasts until next April
Claimants who have been furloughed or whose hours have been reduced temporarily will continue to be entitled to WTC as they will be treated as still working their normal hours for 8 weeks at least.
I’ve been doing a few “better off” calculations on the new rates, and it looks as if in the majority of cases, where there would have been very little difference before they are now significantly better off on UC. (Obviously there are circumstances, involving disabled children etc where this is not the case, but in many of the “run of the mill” cases there is a big difference). This is because the Applicable Amount figure for HB, ESA, Income Support and JSA has hardly risen at all as opposed to the £100 a month rise in personal allowance in UC. But both the £100 a month rise and the removal of the Minimum Income Floor are explicitly only for 12 months. Its obviously nearly impossible for people already stretched to resist the extra money now and there will probably be huge numbers moving off legacy benefits over the next few months, but will there be a problem next April? Its easy to imagine the MIF being reinstated - less easy to imagine the rate in UC being moved down, rather than up or frozen in the future, but not impossible. What do other advisors think?
I think the current government is most likely to invoke its current “generosity” and the coronavirus pandemic to justify austerity (rather than, say, tax changes) with a renewed vigour next year. We are all in this together, after all.
But we can only advise on what we know. For many people it will be better to make use of the additional UC amounts regardless of what happens next year, but at best we can advise them that the regulations provide for everything to return to normal at the end of the tax year.
Claimants who have been furloughed or whose hours have been reduced temporarily will continue to be entitled to WTC as they will be treated as still working their normal hours for 8 weeks at least.
Where’s that from, Gareth?
Claimants who have been furloughed or whose hours have been reduced temporarily will continue to be entitled to WTC as they will be treated as still working their normal hours for 8 weeks at least.
Where’s that from, Gareth?
There’s a lot of information here https://www.litrg.org.uk/tax-guides/coronavirus-guidance/coronavirus-employees-work-changes but I haven’t been able to find official HMRC guidance.
Guidance
A7/2020: The Social Security (Coronavirus) (Further Measures) Regulations 2020
Updated 6 April 2020
...
7. Claimants who have been furloughed or whose hours have been reduced temporarily will continue to be entitled to WTC as they will be treated as still working their normal hours for 8 weeks when entitlement will be reviewed. This means they will also continue to be entitled to the additional earnings disregard for the same period.
Thanks Gareth I have been searching for this. I’m not too sure, would have to check my calculations but I think that the rise of the disregard is necessary so that the rise in Tax Credits isn’t cancelled out in the calculation of income side, but on the calculation of Applicable Amount side we are working on a personal allowance of £74.35. My brains a bit cloudy this morning so I cant decide whether this is fair - avoid a double bonus compared to UC, or unfair - much lower amount considered to b e needed personally.
Slightly bizarre that the Tax Credits guidance is in a housing circular but not something i can find on public facing information pages about Tax Credits!