Universal credit

UC is a means-tested benefit for people on a low income who are under pension age (or who have a partner under pension age). UC can be claimed by workers, by jobseekers and by people whose ability to work is limited by their health or circumstances.

UC has been gradually introduced from October 2013 and is replacing the following means-tested benefits and tax credits:

•IS;
•income-based JSA;
•income-related ESA;
•HB (for most people);
•CTC;
•WTC.

People already getting these benefits and tax credits can continue getting them for a time – eg, until their circumstances change and they lose entitlement, or until they are written to by the DWP/HMRC and asked to move to UC under the ‘managed migration’ process.

To qualify for UC, the client must usually:

•meet certain residence rules and not be a ‘person subject to immigration control’;
•not be a student (with some exceptions);
•have a low enough income and have capital below £16,000;
•agree to meet certain work-related requirements, including attending work-focused interviews, and preparing for and looking for work.

Note: there are special exceptions for people moving to UC under ‘managed migration’. For more information, see CPAG’s Welfare Benefits and Tax Credit Handbook.

The amount of UC a client can get is calculated using a standard allowance plus a number of ‘elements’ including child element(s), housing costs element, carer element and elements connected with health/disability. The client’s earnings, other income and savings are taken into account when calculating their UC amount. Their UC payment can be further reduced by, for example:

•the benefit cap, ‘bedroom tax’ or local housing allowance rates (like HB - see here);
•the ‘two-child limit’, which means that your client may not get a child element in respect of a third or later child born after 5 April 2017.

UC is paid monthly in arrears. New UC claimants can apply for a repayable ‘advance’ to tide them over until their first payment. Repayments are deducted from future benefit payments and the rate of repayment is difficult to reduce. It is therefore essential to have details of any advance repayments when drawing up the client’s budget.

Clients in Scotland can ask for their UC to be paid twice monthly rather than monthly and for their housing costs element to be paid directly to their landlord. These are called the ‘UC Scottish choices’. These are similar to the DWP’s ‘alternative payment arrangements’, although the DWP can also split a single UC payment between two partners. The alternative payment arrangements are discretionary and are only available in exceptional circumstances though. Clients cannot set up one of the Scottish choices if they already have a similar alternative payment arrangement in place.

Clients who need help with expenses such as buying new furniture or household equipment may be able to apply for a ‘budgeting advance’. Budgeting advances must be repaid, usually by deductions from future payments of UC.

UC replaces income-related ESA for people whose ability to work is limited by health or disability. A client’s ability for work is assessed by the DWP using a ’work capability assessment’. A small number of people are automatically treated as having limited capability for work and do not have to undergo this assessment – eg, people who are terminally ill.

A work capability assessment can lead to one of three outcomes:

•a client is found to have ‘limited capability for work and work-related activity’. They do not have work-related requirements and may receive an extra amount of UC; or
•a client is found to have ‘limited capability for work’. They can still have some work-related requirements (eg, work preparation activity) and do not usually get an extra amount of UC; or
•a client is found ‘fit for work’ and can be given a range of work-related requirements.

Most UC claimants have work-related requirements. Clients may have their UC reduced by a sanction if they do not comply with their work-related requirements, without good reason. There is a right to appeal this, and it is always worth considering whether a sanction could be challenged.

Clients whose benefit has been reduced by a sanction may qualify for a hardship payment if they can demonstrate that their reduced level of income is causing hardship.

UC is a qualifying benefit for free school meals (see here), help with health costs (see here) and some Scottish benefits such as Best Start grant (see here), Scottish child payment (see here) and funeral support payment (see here).

It is not taxable.