DWP confirms benefit cap rates will remain unchanged as payments rise – rules explained

Universal Credit made 'more generous' by Chancellor says expert

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Universal Credit, PIP and other benefits will be rising from April 2022 as the DWP confirmed payments will increase by 3.1 percent in 2022, in line with the Consumer Price Index (CPI). As Thérèse Coffey, the Secretary of State at the DWP, confirmed the changes in Parliament, it was also shown that the benefit cap itself will not be increased.

Benefit cap rates

Yesterday, the DWP released a benefit and pension rates policy paper confirming the increases for the 2022 to 2023 tax year. This document confirmed benefit cap rates will remain at their current levels as the UK enters the new year.

The benefit cap is a limit placed on the total amount of support a person can receive from the Government. It applies to most claimants aged between 16 and state pension age.

This cap affects many benefits which include Universal Credit, Child Benefit and Income Support. Generally, those over state pension age are not affected by the benefit cap but if a claimant is part of a couple, with one being under the state pension age, the cap may apply.

Additionally, those who are receiving support for a disability or are responsible for a child may not be affected by the cap.

Where the cap is applicable, it will limit people differently based on their living situation and address. The amount a person gets through the benefit cap depends on whether they live inside or outside Greater London, are single or in a couple or have children living with them.

Outside Greater London, the benefit cap is £384.62 per week (£20,000 a year) if a claimant is in a couple or is a single parent whose children live with them. This reduces to 257.69 per week (£13,400 a year) for single adults.

Within Greater London, the benefit cap rates are higher. Coupled claimants and single parents will be limited at 442.31 per week (£23,000 a year). For single adults, the cap will be 296.35 per week (£15,410 a year).

It should be noted there are unique rules on the benefit cap for Universal Credit claimants. The benefit cap may not affect Universal Credit payments for up to nine months following an initial claim, known as the “grace period”.

This grace period will be applied where a claimant is applying for Universal Credit because they stopped working or your earnings went down, are now earning less than £617 a month and in each of the 12 months before their earnings went down or they stopped working, they earned the same as or more than the earnings threshold (this was £604 up to April 11 2021, and is £617 from April 12 2021).

Additionally, a claimant’s partner’s earnings will be included when working out how much they earned even if they’re not claiming benefits. These rules are important to understand as recently, the DWP announced the lowest earners on Universal Credit will be getting a cash boost.

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£1000 boost for nearly two million working households on Universal Credit

On November 24, the DWP announced it had “worked around the clock” to implement a reduction to the Universal Credit taper rate as well as an increase to claimants’ work allowances, effectively giving the lowest paid workers on Universal Credit a tax cut worth £2.2 billion.

By bringing in the change a week earlier than planned, up to 500,000 more people could benefit from these changes before Christmas, with almost two million of the lowest paid in-work claimants overall being better off by around £1,000 a year on average. Claimants will be notified of how much Universal Credit they will be awarded in their usual monthly statement, with the first of those to reflect the changes being issued this week.

Thérèse Coffey, the Work and Pensions Secretary, commented: “From today, two million people will see their income boosted by £1,000 per year, on average, as we bring in an effective tax cut worth £2.2billion for the lowest paid.

“We are making the change earlier than planned which means up to 500,000 more households can benefit before Christmas.”

Rishi Sunak, the Chancellor of the Exchequer, also welcomed the news.

He said: “We want this to be a country that rewards hard work by helping the lowest income families keep more of their hard-earned cash.

“That’s why at Budget, I announced an effective tax cut for two million people worth over £2billion. These changes come into force today and will mean that with Christmas approaching, hard-working families keeping an extra £1,000 a year of what they earn.”

Work allowances, the amount a claimant can earn before their Universal Credit is reduced, will increase by £500 per year going forward, meaning many families will be able to earn over £500 per month before their benefits are tapered off.

Simultaneously, the taper rate, the amount that a person’s Universal Credit is reduced by when their earnings are more than their work allowance, will drop from 63 percent to 55 percent.

The DWP confirmed as a number of Britons are expected to now be newly eligible for Universal Credit and those not currently claiming potentially being better off, people are being urged to check a benefit calculator to see if they could increase their income.

Benefit calculators

Benefit calculators are free-to-use tools found online which can help users find out what benefits they could be entitled to, how they can claim them and how the payments will be affected if they start work. These calculators are independent of the Government and have replaced the state’s Benefits Adviser service.

While the DWP itself does not provide these calculators, a number of charitable organisations do, with the following being highlighted by the Government:

  • Policy in Practice – for information on income-related benefits, tax credits, contribution-based benefits, Council Tax Reduction, Carer’s Allowance, Universal Credit, how these are calculated and how your benefits will be affected if you start work or change your working hours
  • entitledto – for information on income-related benefits, tax credits, contribution-based benefits, Council Tax Reduction, Carer’s Allowance, Universal Credit and how your benefits will be affected if you start work
  • Turn2us – for information on income-related benefits, tax credits, Council Tax Reduction, Carer’s Allowance, Universal Credit and how your benefits will be affected if you start work or change your working hours

When using these calculators, users will need to have certain information at the ready. This includes details on savings, income levels and outgoings.

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