The Government has come under increasing pressure over the last couple of months to ensure that those working claimants currently getting Tax Credits, when they are migrated onto UC, are no worse off.
And there have been many stories in the press about working UC claimants really struggling.
So this week's Budget announced three changes that will help some UC claimants.
More earnings disregarded for some
From April 2019 the Work Allowance for claimants with dependent children and those where they or their partner have a Limited Capability for Work, is increasing by £83.33 per month. This means that working parents and those with a Limited Capability for Work where they (or their partner) are working will be better off by up to £52.50 per month.
Unfortunately, the government has kept the Work Allowance for other claimants ie those without children or who have not been found unfit for work - at £0 – meaning their UC is reduced by 63% of the whole of their net monthly earnings.
Q: What is the Work Allowance?
A: It's like an "earnings disregard". It's an amount of earnings that the claimant keeps without it affecting their UC entitlement.
Q: How can we ensure that a claimants’ UC award is correct, ie that their earnings are reduced by the appropriate Work Allowance?
A: Ask them to logon to their UC account and show you the award notification on their UC account. It will give the net earnings figure followed by the amount taken into account in the calculation. Subtract the Work Allowance that should apply in their case from the first figure and then multiply the result by 63%. If the second figure on their award is higher than this, there’s something wrong. They need to request a Mandatory Reconsideration on their UC journal - asking that the DWP review the Work Allowance that is included in the award.
Q: What about people who have been found unfit for work but there’s no Limited Capability for Work Element included in their UC award (ie because their period of incapability for work started on or after 3rd April 2017)?
A: There should still be a Work Allowance – it’s not related to whether or not they get the Element, but the fact that they have been found to have a Limited Capability for Work.
The minimum income floor for self-employed claimants
This can affect those UC claimants who are gainfully self-employed and in the 'all work requirements' conditionality group.
At the moment, those UC claimants who started their business within the previous 12 months of making their claim for UC (or who start gainful self-employment whilst on UC) are allowed a 12-month ‘start up’ period - a period when the Minimum Income Floor will not be applied.
During this period the DWP use their actual earnings and expenses when working out their UC entitlement. However when the 12 months are up the Minimum Income Floor rules will then be applied. This means that they are treated as earning at least the minimum wage / living wage for someone of their age for the number of hours the DWP expect them to work, even if they actually earn less.
However, from July 2019 any self-employed claimants who are ‘manage-migrated’ onto UC will automatically have a 12 month ‘grace period’ until the Minimum Income Floor rule starts to apply, regardless of how long they have been trading.
And from September 2020 any self-employed claimants who 'naturally migrated' onto UC (ie. where a change in the claimant’s circumstances triggers the need for them to claim UC) will automatically have a 12 month ‘grace period’ until the Minimum Income Floor rule starts to apply again regardless of how long they have been trading.
More information on self employment click here
. The Surplus Earnings Rule
The idea of the Surplus Earnings Rule is that when someone earns a large amount or gets a large bonus, they should make those earnings last for more than one month.
The rule was introduced in 2017, however a concession was made that meant it would not affect so many claimants.
The Government has announced that this concession will continue until April 2020.
So until April 2020 the point at which this rule kicks in will remain at the amount of earnings at which the claimant ‘floats off’ UC plus £2500. From April 2020 it will drop to the original proposed amount, ie the earnings at which the claimant ‘floats off’ UC plus £300.
Whilst the threshold remains so high, very few claimants will be affected by this rule, however from April 2020, when the threshold reduces, there is potential for many claimants to be affected, including those who receive two four-weekly or monthly wages within one UC Monthly Assessment Period.
Find out more about the surplus earnings rules on our website here.