Universal credit: How does universal credit work?
Universal credit is a single payment made directly into claimants’ bank accounts to cover the benefits they are eligible to receive. This benefit was designed to make claiming benefits simpler. Express.co.uk has compiled a guide to explain how it works.
What is universal credit?
Universal credit is a payment made monthly, or twice a month for some people in Scotland, which will help you with your living costs.
This payment is only received by those on a low income or out of work.
The universal credit single payment replaced these payments, which are called legacy benefits by the Department for Work and Pensions:
- Income support
- Working tax credit
- Income-based jobseeker’s allowance (JSA)
- Income-related employment and support allowance (ESA)
- Housing benefit
- Child tax credit.
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Who can claim universal credit?
You might be able to claim Universal Credit if you:
- Are out of work or on a low income
- Are aged 18 or over (there are some exceptions if you’re 16 or 17)
- Are under state pension age, or if your partner is
- Have less than £16,000 in savings with your partner
- Live in the UK.
If aged 16 to 17, there are some cases where you might be eligible for Universal Credit when studying.
You can find out more about eligibility for Universal Credit here.
How much will you receive?
Your Universal Credit payment is made up of a standard allowance and any extra amounts that apply to you.
You can use this benefits calculator to find out how much you might get.
Your circumstances are assessed each to determine how much universal credit you receive and any changes in your circumstances may affect how much you are paid for the entire assessment period, not just from the date you report these changes.
Additionally, the benefit cap may limit the total amount of benefit you receive.
The standard monthly allowance for each circumstance is as follows, excluding any additional benefits you may be entitled to:
- Single and under 25: £251.77
- Single and 25 or over: £317.82
- In a couple and both aged under 25: £395.20
- In a couple and either of you are 25 or over: £498.89
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How often is universal credit paid?
Universal Credit is paid monthly in arrears in England, Wales and Scotland.
In Scotland, you can, however, ask for universal credit to be paid fortnightly instead of in a single monthly payment.
In Northern Ireland, the default payment period is every fortnight, but you can choose to get monthly payments.
How does universal credit work when working?
You are able to work as many hours as you wish when on universal credit as there are no limits as with other benefits such as income support or working tax credits.
If you are in paid work, you might be entitled to receive a work allowance.
This work allowance is an amount of money which you can earn before your universal credit payment is affected.
You will be entitled to a work allowance if you’re:
- Responsible for dependent children
- You cannot work as much because of illness or disability.
You are entitled to work allowance, up to the threshold of your predicament and then your universal credit payment will then go down by 63p for every £1 you earn above this amount, which is called the earnings taper.
If you do not qualify for the work allowance, your Universal Credit payment will go down by 63p for every £1 on all your earnings.
Employer-paid benefits, such as Statutory Maternity, Paternity, Adoption and Sick Pay are treated as earnings and are affected by the taper.
Some income, called unearned income, which you do not get from working can also be deducted from your maximum award.
- New-style Jobseeker’s Allowance (JSA)
- New-style Employment and Support Allowance (ESA)
- Pension Income
- Some benefits that are not replaced by Universal Credit.
Usually, £1 will be deducted from your Universal Credit payment for every £1 of unearned income.
Unearned income that will not be taken off your Universal Credit payment includes:
- Child Benefit
- Maintenance payments
- Disability Living Allowance
- Personal Independence Payment
- Income from boarders and lodgers.
How to apply for universal credit?
You must apply for Universal Credit online.
You have to apply as a couple if you and your partner live together, even if you are not married.
You might also need to phone the Universal Credit helpline to book an interview with a work coach, but will be advised to do this after you apply.
To apply you will need:
- Your bank, building society or credit union account details (call the Universal Credit helpline if you do not have one)
- An email address
- Information about your housing, for instance, your rent amount
- Details of your income, for example, your payslips
- Details of savings and any investments, like shares or a property that you rent out
- Details of how much you pay for childcare if you are applying for help with childcare costs.
If you do not provide the right information when you apply it might affect when you get paid or how much you get.
You may also have to verify your identity online, which means you will need some proof of identity for this, such as a driving licence, passport or debit or credit card.
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