Universal credit is the new support payment for those looking for work or on a low income. It replaces:
- Child tax credits;
- Working tax credits;
- Income support;
- Housing benefit;
- Income-based job seeker’s allowance;
- Income-related employment and support allowance.
It will be paid to claimants in a single monthly payment and will be calculated from the up to date information available due to the implementation by HMRC of the RTI (Real Time Information) system for those subject to PAYE or monthly reports of earnings to DWP by the self-employed.
Universal credit (UC) will be implemented in phases from April 2013 until the end of 2017. It will start in the North West of England in April 2013 and claims for UC can be made nationally from October 2013. From April 2014 all new claims will be for UC and existing claimants will gradually be moved to UC by the end of 2017.
Why is Universal Credit different
- there is only one payment like a salary;
- support for housing costs goes direct to the claimant within the single payment;
- it will still be paid when claimants start a new job or increase part time hours;
- it will be managed through an online account and applied for online;
- it is available to those on low incomes as well as those out of work.
The draft regulations impose new reporting requirements that disadvantage the self employed. To receive their payments they need to make a monthly report of earnings on a simplified cash income basis via an online form within seven days of the period end or their payments will be suspended. UC benefits will be withdrawn if the income report is not filed within four weeks.
Also to prevent UC subsidising low paying or non-viable businesses there is a minimum level of income that the self employed individual is assumed to receive. Although those starting a business will be entitled to a once only period where this does not apply.
Those already claiming benefits under the old welfare system will be better off than under the UC system and therefore it is worth applying for working tax credits for example before October 2013 and then the claimant will receive higher amounts over the years where UC is phased in.