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What is Universal Credit?
What does Universal Credit cover?
Universal Credit was introduced in 2013, and is a benefit payment for people in or out of work.
It replaces some of the benefits and tax credits that people might have received under the previous benefits system:
- Housing Benefit
- Child Tax Credit
- Income Support
- Working Tax Credit
- income-based Jobseeker’s Allowance
- income-related Employment and Support Allowance.
The following benefits currently remain outside of Universal Credit:
- council tax support
- carer's allowance
- contribution-based jobseeker's allowance and employment and support allowance
- disability living allowance / personal independence payment (PIP)
- child benefit
- social fund
- statutory sick pay
- statutory maternity pay
- maternity allowance
- industrial injuries disablement allowance
- bereavement benefits
Who can claim Universal Credit?
A person might be able to claim Universal Credit if:
- they’re out of work or on a low income
- they’re aged 18 or over (there are some exceptions if they’re 16 or 17)
- they or their partner or spouse are under State Pension age
- they and their partner or spouse have less than £16,000 in savings
- they live in the UK.
Objectives of Universal Credit
The two aims of the change are to:
- streamline and simplify the benefits system for both benefits claimants and those administering the system
- encourage a return to work, by:
- giving claimants the facilities to find a job, and potentially reducing the benefit payment if no appropriate effort is made to job hunt
- benefits won’t be suddenly taken away if the claimant starts work.Universal Credit will only be steadily withdrawn as their take home pay increases, and they move toward financial independence.
They will be better off for every additional hour they work, whether in a full or part-time job. By combining in work and out of work benefits Universal Credit removes the financial risks of taking up a job.
Difference between benefits system and Universal Credit
The biggest differences are:
- rather than the 4-week (28 day) cycle of the old benefits system paid in advance, it is akin to a salary, paid monthly in arrears.This is to encourage recipients to budget accordingly, to be prepared for a work environment
- recipients can get Universal Credit if they’re unemployed but also if they’re working
- instead of getting a separate housing benefit, their rent will usually be paid directly to them as part of their monthly Universal Credit payment
- application is on-line
- claims are handled by a central office run by the Dept of Works and Pensions (DWP) rather than the local Benefits Office, run by the Local Authority
- ·once a claimant registers, they retain the same account.Thus, if they were to come off Universal Credit, and then have to go back on, they would not have to re-register as their account would remain in place
- ·of the claimant gets paid work, full, or part-time, their payment will be reduced by less than they have earned.Thus they will be better off in work.
Brief history
1948 saw the launch of the comprehensive system of social security recommended by the Beveridge report of 1942.
The key principle was that everyone who worked would pay a sum to the government for as long as they worked, and in return would have access to government aid for the unemployed, ill, retired, or widowed, and extra payments to those having children.
The use of this universal insurance removed the means test from the welfare system, a disliked pre-war way of determining who should receive relief.
The Welfare System, including the benefits system grew in the forties, fifties, and sixties, but began to change in the late seventies, when Margaret Thatcher and the Conservatives began a series of reforms regarding the size of the government.
They wanted fewer taxes, less spending, and so a change in welfare, but equally were faced with a welfare system that was starting to become unsustainable and top heavy. Thus, there were cuts and changes, and private initiatives began to grow in importance, starting a debate over the role of the state in welfare which continued through to the election of the Tories under David Cameron in 2010, when a "Big Society" with a return to a mixed welfare economy was touted.
Cameron made Ian Duncan Smith the Works and Pensions Secretary, with the task of introducing a new system of paying benefits. Duncan Smith had been working on this for several years whilst in opposition.
How to claim Universal Credit
There are 4 steps to claim Universal Credit
- check eligibility - www.gov.uk/universal-credit/eligibility
- create an on-line Universal Credit account - www.universal-credit.service.gov.uk/start
- make a claim, and verify identity
- accept the claimant commitment.
Universal Credit is claimed online. If the claimant is uncertain about or has no access to the internet all Local Authorities, Citizens Advice, and many libraries, have the facilities to make the claim, and frequently have staff who can assist. Under exceptional circumstances, claims can be made over the phone (see below).
A claim is made at www.universal-credit.service.gov.uk/start with useful information at www.gov.uk/universal-credit/how-to-claim
The claimant must have the following information before they start:
- National Insurance Number.Look at www.gov.uk/lost-national-insurance-number to find it.
- email address
- phone number/access to a phone
- their address
- bank, building society or credit union account details
- proof of identity/nationality, for example:
- driving licence
- passport
- debit or credit card
- payslip or P60
- employer details, if claimant, or partner are working
- details about any earnings or other income the claimant, or partner has - for example payslips
- details of any savings, investments or other capital the claimant, or partner has
- details of any other benefits they receive
- any disability or health condition that affects their work
- how much they pay for childcare, if they want help with childcare costs
- their savings and any investments, like shares or a property that they rent out
- housing details
- if renting
- Landlords address
- rent costs
- if owner occupier:
If they qualify for a Support for Mortgage Interest (SMI) loan, they can get help paying the interest on up to £200,000 of their loan or mortgage.
- If they own a leasehold property, it can also help them pay for service charges, including:
See Appendix A for details on making a claim
Claimant unable to use the Internet.
A claimant might be able to apply for Universal Credit over the phone or, in exceptional circumstances, arrange for someone to visit them at home. They can only use these options in certain situations:
- don't have regular access to the internet
- aren't confident using a computer or smartphone
- have problems with their sight
- have a long-term physical disability or mental health condition which stops them from applying online
- have a physical condition that stops them from using a computer or smartphone
- can’t read or write
After making the initial Universal Credit claim
Payments
It usually takes five weeks to get the first Universal Credit payment. After that, the claimant should get their payment on the same date every month.
Unable to open a bank account
The government Payment Exceptions Service can be used by anyone who is unable to open an account.
This is ? payments card, an email voucher, or ? text message with ? unique reference number that can be used to make benefit payments at P?yPoint outlets in stores and newsagents.
Late payments
If the payment is late, the claimant must log in to their online account and leave a message for their work coach in the journal.
Ask them to check whether anything is missing from the claim that might be causing the delay.
If this is the first payment of Universal Credit the claimant can ask for an advance payment. This is a loan that will have to repaid from future Universal Credit payments.
The claimant can ask for an advance even if their payment isn’t late.
Journal
The journal is the claimants record of everything they’ve done whilst claiming Universal Credit.
If they are required to look for work, they will set up an account on a website called Find a job (www.gov.uk/find-a-job). They can use this site to look for work and keep a record of some of the things they’ve done to find a job.
The online account
The claimant will use their online Universal Credit account to:
- keep a record of the things they’ve done to prepare or look for work
- send messages to their work coach and read messages they send
- report a change of circumstances
- record childcare costs
- provide details about a health condition or disability
- see how much the claimants Universal Credit payments are
- check what the claimants have agreed to do in their Claimant Commitment
Work Coach
The last step of applying for Universal Credit is to have an interview with the 'work coach' - the person the claimant meets regularly as part of their claim.
After they’ve set up their Universal Credit account, and completed the application part, the claimant can either have the interview at the Jobcentre or over the phone. Their work coach will check their details and ask them to agree their ‘claimant commitment’ - this sets out what tasks they’ll do regularly to get Universal Credit.
If they couldn’t use the ‘Verify’ system online to prove their identity, they’ll have to answer more questions at their interview to prove their identity.
The claimants’ responsibilities
They’ll make an agreement called a ‘Claimant Commitment’ with their work coach.
What they need to do depends on their situation. They might need to do activities such as:
- write a CV
- look and apply for jobs
- go on training courses
They’ll also need to do things like:
If they’re claiming with their partner, they’ll each have a Claimant Commitment and set of responsibilities.
They may need to attend regular appointments with their work coach by phone, by video or face to face in the jobcentre. If they miss an appointment without a good reason, their payment will be affected. This is called a sanction. If a medical professional has said the claimant might have 12 months or less to live, they will not need a Claimant Commitment or face sanctions.
If their payment is stopped or reduced
If they do not meet their responsibilities or what they’ve agreed in their Claimant Commitment, their Universal Credit could be stopped or reduced. This is called a sanction. There are different levels of sanctions and they’re decided based on what the claimant did and how often. They’ll get half a sanction if they apply with a partner and only one of them does not meet their responsibilities. They can appeal a sanction if it’s wrong. Citizens Advice can help with challenging a sanction.
Help if their payment is stopped or reduced
They can ask for a hardship payment if they cannot pay for rent, heating, food, or hygiene needs because they got a sanction. They’ll repay it through their Universal Credit payments – the payments will be lower until it’s paid it back.
They’ll have to show that they’ve tried to:
- find the money from somewhere else
- only spend money on essentials
They can call the Universal Credit helpline to ask for a hardship payment.
Getting the rental element paid direct to the landlord
There is now an on-line application to get payments to be made direct to the landlord. This has replaced the old UC47 application form. Alternatively, the claimant can discuss with their work coach to have the payments made directly to the landlord. This is called an Alternative Payment Arrangement or a Managed Payment to Landlords.
Warm Home Discount
The government is making changes to the Warm Home Discount, which helps low-income f?milies p?y for their he?ting bills. People on Univers?l Credit ?re currently eligible for the scheme, but they must ?pply through their provider.
The £140 gr?nts, which will incre?se to £150 this ye?r, ?re distributed on ? first-come, first-served b?sis. Currently, only those cl?iming the guarantee element of Pension Credit ?re eligible for the gr?nt. This ye?r, however, more people, including m?ny on Univers?l Credit, will be ?utom?tic?lly eligible. If they’re eligible for the p?yment, their supplier will cont?ct them before October 2022. If the claimant believe they should be eligible for energy bill ?ssist?nce but h?ve not received ? letter, they should contact the government’s helpline - 0800 328 5644.
Problems with Universal Credit
Post Office accounts
In November 2022, the DWP will stop paying benefits into Post Office accounts. It follows HMRC’s decision earlier this year to stop allowing claimants to use these accounts. If the tenants Universal Credit or other benefits are paid into ? Post Office card account, they must act quickly to avoid payments being stopped.
Caveat
Landlords and tenants must not forget that Universal Credit is paid in arrears, and it (should) take 5 weeks before the first payment is made.
All claimants have the option to take out an interest-free loan to cover this 5-week delay, the ‘advance payment’. But this loan causes further hardship, as it’s paid back from future Universal Credit payments, reducing the amount people have to live on until the debt is repaid, which could take months.
This must be kept in mind by both parties, and appropriate allowance made.
Problems caused by the claimant
The most common cause of a delay in processing a claim is a lack of some of the required information.
If the tenant is willing, it is often helpful for a landlord to assist them to ensure they have all the necessary information.
Known problems with the Universal Credit system
In 2018, the Child Poverty Action Group conducted a survey on Universal Credit, and reported the following problems:
- Administrative error
- Problems with housing costs
- Difficulties establishing and maintaining a claim
- Migration issues
- Delays
- Issues with the award of disability-related elements
- Communications with the DWP and processing of evidence
- Issues with appeals and mandatory reconsiderations
The problem of the initial payment taking longer than the intended 5 weeks is frequently reported from various sources.
Universal Credit rules mean benefits are deducted when people are behind on bills, regardless of whether it is affordable or not. People are often in debt through no fault of their own – for example, the five weeks wait or historic overpayments due to government mistakes. This would not happen in the private sector, where they would first be able to check if repayments were affordable before being forced to pay.
The amount of Universal Credit received can be reduced even further by welfare reform policies such as the two-child limit and benefit cap. With benefit levels already set on the threshold of destitution any cap or deduction places families at risk of serious hardship.
Other types of Universal Credit claim
If the claimant has children
If they’re a single parent or the lead carer in a couple, their responsibilities will change as their youngest child gets older and will be tailored to their personal circumstances.
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Age of youngest child
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Claimants’ responsibilities
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Under 1
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They do not need to look for work
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Aged 1
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They do not need to look for work. They need to have phone appointments with their work coach to discuss plans for moving into work in the future
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Aged 2
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They do not need to look for work. They need to have regular phone appointments with their work coach and do work preparation activities (for example, writing a CV)
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Aged 3 or 4
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Work a maximum of 16 hours a week (or spend 16 hours a week looking for work)
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Aged between 5 and 12
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Work a maximum of 25 hours a week (or spend 25 hours a week looking for work)
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13 or older
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Work a maximum of 35 hours a week (or spend 35 hours a week looking for work)
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If the claimant gets support with childcare costs
They must:
- report their childcare costs when they pay them
- prove they’ve paid their childcare provider
They’ll need to show proof of their childcare provider for each child. They can use an invoice or contract that includes the provider’s registration number and full contact details.
They’ll also need to prove:
- the amount they paid to the childcare provider
- when they made the payment
- the dates this payment covers
They’ll need to provide evidence such as bank statements, receipts, or invoices from their childcare provider. They can show more than one piece of evidence to prove everything that’s needed. For example, they can use a bank statement to prove the date and amount they’ve paid and an invoice to prove the time period this payment covers. They can report childcare costs and provide proof that they’ve paid by signing into their Universal Credit account. They’ll usually get the childcare amount in their next Universal Credit payment. If they pay for childcare after it’s been provided, they can claim up to 3 months of past costs at a time. There may be a limit to how much they get back if they claim for more than one month’s fees at a time. They would need to speak to their work coach for advice. If they pay for childcare in advance, they can claim up to 3 months of advance costs at a time. They’ll be paid back in their monthly Universal Credit payments during the months the childcare is for
If the claimant is less than 18 years old
There are some situations where they can claim Universal Credit if 16 or 17-years-old, or when studying. These are if any of the following apply:
- they have a health condition or disability and have medical evidence for it, such as a fit note
- they’re caring for a severely disabled person
- they’re responsible for a child
- they live with their partner, have responsibility for a child and the partner is eligible for UC
- they’re pregnant and expecting their baby in the next 11 weeks
- they’ve had a baby in the last 15 weeks
- they do not have parental support, for example they do not live with parents and are not under local authority care
If the claimant, or partner are above State Pension age
If they’re in a couple where one of is above State Pension age and the other is below it (this is known as a mixed age couple), they will make a Universal Credit claim as a couple. When both reach State Pension age their Universal Credit claim will stop and they may wish to apply for Pension Credit and/or Housing Benefit
If they’re in a mixed age couple and are already receiving Pension Credit or Housing Benefit, they will stay on those benefits as long as their circumstances remain the same and there is no break in their claim. If they have a break in their claim or their circumstances change, they may need to make a claim for Universal Credit instead.
If the claimant is self employed
If the claimant is self-employed, Universal Credit will provide support to help them grow their business.
To get this support they will need to be able to show that:
- self-employment is their main job or main source of income
- they get regular work from self-employment
- they’re work is organised – this means they have invoices and receipts, or accounts
- they expect to make a profit
If they can show all these things, they will be considered to be ‘gainfully self-employed’. If they can’t show all these things, they might have to look for other work if they are to keep receiving Universal Credit.
How much will they get if self employed
If they are gainfully self-employed whilst claiming Universal Credit they will not be expected to look, or be available, for other work. This will help them to concentrate on making their business a success.
However, it will be assumed that they are earning the same amount as someone like them who is in paid work. This will usually be what someone of their age would earn if they worked at the National Minimum Wage for the number of hours that they are expected to work or look for work. This amount is called the Minimum Income Floor. If they already have a claim, Universal Credit will contact them about these changes before they happen. If they earn less than the Minimum Income Floor, Universal Credit will not make up the difference. They may need to look for additional work to top up their income.
If they earn more than the Minimum Income Floor, their Universal Credit payment will be based on their actual earnings. The Minimum Income Floor will not be applied for up to 12 months if they are newly gainfully self-employed. This is known as a start-up period, and during it they won’t need to look, or be available, for other work. But they will need to show that they are taking steps to build their business and increase their earnings when they talk to their Work Coach. They must report any earnings from self-employment to the Department for Work and Pensions every month.
Business assets
If they are gainfully self-employed, their business assets will not be taken into account when they make a Universal Credit claim. Nor will they be considered when it is worked out how much Universal Credit they are entitled to. Business assets include things like machinery, premises and cash held in their business account.
Surplus earnings and losses
If they are self-employed and claiming Universal Credit, earnings, or losses from one month can be taken into account when working out how much Universal Credit they receive in a later month. If they earn more than £2,500 over the monthly amount they can earn before they receive no Universal Credit payment, they are said to have surplus earnings. The amount of earnings above the £2,500 threshold are the surplus earnings and will be taken into account in the next monthly assessment period. This may reduce the amount of Universal Credit they receive in later months, or perhaps mean that they can’t get any Universal Credit payment in those months.
If they make a loss in one month, the loss will be stored and taken into account in months when they make a profit. If the profits are not high enough to fully cover a loss, the remaining loss will be carried forward to the next month when they make a profit. A loss will stop being considered once all their losses have been accounted for or their self-employed business ends.
If they are gainfully self-employed and subject to the Minimum Income Floor, that will still apply even if they make a loss. In months where they make a loss, their Universal Credit payment will be calculated based on their Minimum Income Floor.
Appendix A
How to make a claim
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Signing up for Universal Credit is simple.
To register online click on the link
https://www.universal-credit.service.gov.uk/start
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Enter your postcode and click on the green
button that reads ‘Start’ to begin. Making a
claim may take up to 30 minutes for a single
person and up to an hour for a couple.
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