With the introduction of Universal Credit (UC), there has been newfound confusion about how benefits work. In this article, we will provide a broad overview of the new system and how it functions for the typical individual. As with all matters of personal finance, it is worth doing your own research and contacting Citizens Advice if you require additional help.
Similar to wages, UC is paid in arrears. The qualifying period starts on the day of your claim and runs for 30 days – and then every 30 days from then on in. Your first payment will then be within 7 days of this final date – and then monthly.
For example, if you make a claim on the 1st of December your first payment depends upon your circumstances between the 1st and the 30th. Your first payment would be before the 7th of January. From then on, your assessment period will run from the 30th to the 30th, with payment always before the 7th.
Modernisation of the benefits system has lead to the initial application process being taken almost entirely online. A visit to the Government’s Universal Credit website will provide a range of information, including a link to the application form.
The UC system calculates a range of benefits automatically. The days where you had to apply individually for a variety of different benefits have gone, combining almost all benefits into one. It is worth noting however that there are a few that are separate, such as Child Benefit and Maternity Allowance. For these benefits, a different form must be completed.
Once an online account has been set up, it is likely that they will direct you to call your local Jobcentre to book an appointment to verify your identity. What information you need to take depends on your circumstances, but always includes a form of ID (such as a Passport or Driving Licence) and proof of address and bank account (such as a utility bill and a bank statement). If you are claiming the housing benefit element, they will ask for proof of tenancy, while the disability element requires a fit note.
When complete it will calculate your entitlement automatically every month and pay you directly into your bank account – except for the Housing Benefit element that in some circumstances is paid directly to your landlord.
For most people, the assessment period is calculated automatically. If you are not working, then you are paid the full amount, minus deductions. If you work, then it is slightly more complicated.
The goal, ostensibly, is to ensure that it “pays to work”. For every £1.00 you earn, your UC allowance will reduce by £0.63. At the beginning of your claim you may need to provide proof of earnings (and will continue to have to if you are self-employed), but from then on they will automatically pull the information from HMRC (if you are PAYE).
Deductions come out of your allowance and include things such as other benefits, savings, sanctions and fines. For example, if they give you a separate £100 maternity allowance, then this will be subtracted from your UC. Child Benefit is considered entirely independent and is not deducted. Savings over £6,000 lead to a UC reduction of £4.35 per £250, up to a maximum of £16,000 which would stop your benefits completely.
If they have overpaid you, then they will claim money back from future payments. They give fines and sanctions out if you do not stick to your commitments or voluntarily commit fraud – such as by not reporting a change in circumstances.
If you are ill for over four weeks, they will ask you to come into a fit-for-work assessment at your local Jobcentre. Here they will assess how your illness impacts your ability to work and will calculate any additional entitlements you may have.
Complicated and full of controversy, the overarching goal of UC is ostensibly to simplify the process. That being said, if you do fall into debt (such as overdrafts, loan arrears) because of delays to your payment there are financial schemes in place to aid you – more information can be found at the Citizens Advice website.
Written by Marley Sexton
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