Benefit Cap Exceptions & WTC Enquiry

On the Gov.Uk website it states…

Benefits that aren’t included
You’re not affected by the cap if anyone in your household qualifies for Working Tax Credit or gets any of the following benefits:

2. What you’ll get
Element Amount
You’re a couple applying together Up to £2,010 a year
You’re a single parent Up to £2,010 a year
You work at least 30 hours a week Up to £810 a year
You have a disability Up to £2,970 a year
You have a severe disability Up to £1,275 a year (usually on top of the disability payment)

How does this work out in that if you receive any of the above then surely this will take you well over the cap amount, or can you claim U/C and salary and WTC eg (You work at least 30 hours a week Up to £810 a year)then this would mean you could claim an enormous amount of money on top of your (Single and 25 or over £317.82)UC entitlement. It also states “anyone” so if your 21 year old child receives WTC then again is there no cap for the resident parents.I am obviously missing the point!

Secondly for those in receipt of WTC and in full time employment, will this mean that these people will have their future WTC payments be paid in the form of U/C!

WTC and UC are mutually exclusive:

- you are exempt from the HB benefit cap if you are entitled to WTC
- you are exempt from the UC benefit cap if you earn £430 a month
- it is impossible to be on UC and entitled to WTC at the same time

The gov.uk info is geared towards legacy benefits, where the benefit cap is part of HB, because so far there are few if any UC claimants in line to be capped.  The vast majority of punters who need to find out about the benefit cap are on HB and not UC.

gov.uk is oversimplifying if it says the benefit cap doesn’t apply when anyone in the “household” gets (inter alia) WTC.  It must be the HB claimant or partner who is entitled to WTC

It’s also not ‘entitled to’ WTC’ but working enough hours.  It is possible to have an income too high for Working Tax Credit but still in the cap range.

That is certainly the policy intention and what DWP has told local authorities in guidance, but HB Reg 75E(2) requires that the claimant be “entitled to” WTC.  DWP’s interpretation of this is that the person is eligible in principle for WTC - works enough hours as Gareth says - even if their income is too high.  In the same way the queen is “entitled to” guarantee credit. If it means more people avoid the cap then councils might as well go along with it.

This causes confusion to councils in JSA cases: claimants are shown on CIS as being “entitled” to amounts of both JSA(c) and (ib) in cases they clearly are not entitled to (ib).  DWP is saying “well that’s what you would have been entitled to if it weren’t for the fact that your other income is too high”.

Yes. as I thought if you earn enough to qualify for WTC then that will wipe your UC out after the 65 pence deduction rule. Am I correct in thinking this. Again secondly if you have a person/couple who work and receive WTC and no other bens, will they have to make a claim for UC in order that their WTC payment figiures continues in payment ie in the form of UC and not WTC.

I reply to both of those questions:

Nil WTC qualifiers

No, it cannot be assumed that income equal to the nil-WTC threshold will also be too high for UC: that is because the elements of WTC entitlement take no account of children or housing costs, whereas UC does.

What you are getting at I think is that someone whose income is too high to qualify for any legacy means-tested benefits (WTC, CTC, HB ... the lot) will also tend to find that their income is too high to qualify for UC.  As a very crude rule of thumb that has some merit, but there are enough differences to make it an unreliable assumption for all but the most superficial purposes.  For example

- some people who do not qualify for legacy benefits will qualify for UC, for example because support for childcare is more generous (this is especially the case for owners)
- some people who do qualify for legacy benefits will not qualify for UC, for example Tax Credit claimants with capital in excess of £16,000

Claimant on WTC only

In the long term all current legacy benefits will undergo “managed migration” but according to the latest plans that isn’t due to start for another three years.  In the meantime, anyone getting any combination of legacy benefits will continue to do so unless a natural change of circumstance causes them to migrate.  In most of the country that is still something that only affects a small number of people.  Your in-work WTC-only claimant has no need to change anything: if they are happy as they are they can stay that way until 2019.

Many thanks for the reply - do you think it’s possible that UC will never be fully implemented!

FAO HB Anorak/anyone.

Re your reply 5/9/16, is it possible that you can estimate the maximum salary a single/couple with child can earn and still be eligible for UC merely to cover their child care costs.

Yes, you can calculate back to a maximum earnings amount.

The formula to calculate maximum earnings to qualify for any UC at all is (sum of elements in max UC) - (income other than earnings) / 65 x 100 + (work allowance).  The figures in brackets are variable from case to case.  The example below works for a renter with no income other than earnings and Child Benefit, child not disabled, neither of parents incapacitated or carer.  Let max earnings = “E”.

The rent could be anything - LHA, council rent with/without bedroom tax etc.  For this example, lets say it’s £500 a month.  Let’s say they pay £600 a month of child care fees.  The elements making up max UC are the standard rate for a couple (498.89), the rate for one child (277.08 for the time being), 85% of the child care fees and the rent.  The work allowance for a claim with housing costs included is £192 a month.  So your formula for this example goes as follows:

E = (500 + 498.89 + 277.08 + (600 x 85%)) / 65 x 100 + 192

In this case the maximum monthly earnings to qualify for one penny of UC is £2939.65 after tax, NI and pension contributions.  Sounds like a lot - it’s the rent and child care fees that have raised the bar so high.

Now, you wanted to know how much they could earn and have the child care fees covered: well the answer is E - (100% child care fees / 65 x 100): that gives you an amount of earnings that would leave a UC award exactly equal to the child care fees.  In the above example it would be:

£2939.65 - (600 / 65 x 100) =  £2016.57: with net earnings of £2016.57 this family would receive UC exactly equal to their £600 monthly child care fees.

There is probably a faster way of getting there (er, Rachel?) but I think the above works.  It will work for any amount of UC that you want to reverse-engineer: to establish the amount of earnings that will leave you with £N of UC, calculate E as above and subtract N/65x100