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Last updated 28/02/2018

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Welfare Reform - What you need to know

  • Changes to welfare reform

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    The Welfare Reform Act was passed by Parliament in early 2012 and is set to completely change the way in which welfare benefits, including Housing Benefit, are paid.  

    If you are currently claiming benefits it is important that you are aware of, and understand how, the Government’s reforms could affect you. The Government’s review of the welfare benefits system is part of its plans to reduce the current spend on welfare benefits, with the intention of simplifying the system and ensuring that people are financially better off in work than they would be on benefits.

    Changes include;

    • Employment Support Allowance, Job Seekers Allowance, Universal Credit and Tax Credits (known as working age benefits) are to be frozen for 4 years, from 2016. State Pensions are excluded from this freeze.
    • The replacement of Incapacity Benefit / Income Support, for ill health or disability, to Employment and Support Allowance (ESA)
    • The removal of a monetary premium in the Work Related Activity Group of ESA
    • The introduction of a £20,000 Benefit Cap from 7 November 2016
    • The continued roll-out of Universal Credit and the digital service
    • Tax Credit changes for families with three or more children 
    • Non-Dependent deductions changes, with different amounts for people in receipt of Housing Benefit and Universal Credit.
    • The removal of the “family premium” for Housing Benefit calculations for new claimants, or where there has been a break in the claim. 
    • Reducing to 1 month the period of time that Housing Benefit will backdate for new claims from working age claimants.
    • Reducing the amount of time Housing Benefit will pay for if you are away from your property to 4 weeks. There are some exceptions to this mostly based around receiving medical treatment.
    • Reducing Housing Benefit awards for under occupying a property (bedroom tax)
    • The replacement of Disability Living Allowance (DLA) with Personal Independence Payment (PIP) and the aim of having all current adult DLA recipients invited to claim PIP by the end of 2018.
    • Reductions in the rate of Housing Benefit paid to single households aged 35 or under from April 2018.

     

    What we have listed is just a brief summary of the changes. Our experienced money advisors will be able to determine how any of these changes will impact your household.

     

  • Universal Credit

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    Universal Credit is a relatively new benefit which was introduced in October 2013. By 2022 it is intended that for anyone of working age it will have replaced the following benefits: 

    • Income Support
    • Income Based Job Seekers Allowance
    • Income Related Employment and Support Allowance
    • Child Tax Credit
    • Working Tax Credit
    • Housing Benefit

     

    The main change that people will see as they claim or transfer on to Universal Credit is that their benefits will all be made directly to them in one monthly amount. This will include any monies for their rent (known as the housing cost element). Unlike Housing Benefit, once a person is in receipt of Universal Credit they can no longer opt to have their housing cost element paid directly to their landlord. It becomes the responsibility of the claimant to ensure that they pay their landlord directly from their monthly benefit award.  

    In some circumstances, particularly if the tenant is vulnerable or in rent arrears, landlords can apply for an Alternative Payment Arrangement (APA) which will, if accepted, allow the tenant’s housing cost element to be paid directly to their landlord. 

    Universal Credit is being rolled out gradually and anyone currently on the benefits listed above will not be transitioned on to Universal Credit until the earliest of 2018. 

    More information on Universal Credit can be found by clicking this link https://www.gov.uk/universal-credit/overview

    Universal Credit Money Manager

  • Under-Occupation

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    The number of bedrooms allowed under Housing Benefit rules depends on the household’s composition. Their age, their sex, the family make up,  whether any other adults live there and whether there are any special circumstances that qualify for an extra bedroom. 

     The basic rules are that one bedroom is allowed for each of the following:

    • A couple
    • A single adult
    • A child over the age of 16
    • 2 children of the same sex under the age of 16
    • 2 children of either sex under the age of 10

     

    The number of bedrooms a household needs can be increased in certain circumstances. The rules in this area are complicated but include the following groups:

    • Disabled adults who need overnight care
    • Households with disabled children who cannot share a bedroom because of their disability
    • Foster carers
    • Households with adult children in the armed forces who are away from home

     

    The bedroom entitlement rules do not apply to:

    • Pensioners living in social housing accommodation 
    • People who live in supported accommodation
    • People who rent their property under a shared ownership scheme.

     

    If a tenant is assessed as under occupying their accommodation a reduction will be made to their Housing Benefit or housing element cost entitlement.  The reduction is dependent upon how many bedrooms are under occupying by.  The rates are as follows:

    • 14% reduction for having one extra bedroom
    • 25% reduction for having two or more extra bedrooms.
  • Benefit Cap

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    The Benefit Cap has been in place since 2013. The current benefit cap rules restrict a family’s weekly benefit to £500 per week (£26,000 per year) or £350 per week for a single person. 

    From 7 November 2016 this is set to change. From this date, the benefits cap will be reduced to £384 for a family’s weekly benefit entitlement (£20,000 per year). There are a number of exemptions to the new benefit cap which can be found here

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/245745/benefit-cap-factsheet_24.07.13.pdf

    The intention will be that if a tenant’s weekly benefits income is above £384 per week, and they do not fit into one of the exemption criteria, their benefit will be reduced below this level. The first benefit that will be reduced is their Housing Benefit entitlement and it will be the responsibility of the tenant to make up this shortfall with their landlord. 

    In some cases it may be possible to apply for a Discretionary Housing Payment to assist, in the short term, with any reduction in income due to the benefits cap.

  • Non Dependents

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    If a tenant shares their home with someone who is not their partner or a dependent child then their Housing Benefit or housing element cost entitlement can be reduced because there is a non-dependant in the household.

    A non-dependant is a person who resides at the property and 

    • is over 16; and
    • is not partner or dependent child of the tenant; and
    • is not liable for paying the rent.

     

    In many cases a non-dependant is either a grown-up son or daughter, or an elderly relative.  The rate of the non-dependant deduction is determined by the non-dependant’s economic status. It is possible to have a non dependant in a household and for the tenant’s Housing Benefit or housing element cost entitlement not to be impacted. Non dependant exemptions include if a tenant is registered blind, in receipt of Disability Living Allowance care component, the daily living component of Personal Independence Payment or Attendance Allowance.

  • Disability Living Allowance (DLA) - Personal Independence Payment

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    Disability Living Allowance (DLA) was scrapped in 2013 for anyone aged 16-64 and will eventually be replaced by Personal Independence Payment (PIP). Anyone aged 16 plus can no longer make a new claim for DLA, instead they must make an application for Personal Independence Payments (PIP). Children under 16 are still able to claim DLA whilst people on Attendance Allowance are not affected by this change. 

    It is the intention that by 2018, everyone aged 16-64 who was claiming DLA will have been invited to claim PIP.  No one in this age category will automatically move onto PIP without making a new claim. If a person is an existing DLA claimant then it is vitally important that they respond to a letter they will receive inviting them to make a PIP claim. 

    PIP is assessed differently to DLA. It requires claimants to score enough points to be eligible for the benefit, 8 being the standard rate and 12 being the enhanced rate. It still has two components, daily living and mobility but most people are now required to attend a medical assessment before a decision is made about their claim. 

    More information on PIP can be found here https://www.gov.uk/pip/overview

     

  • Discretionary Housing Payment

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    Discretionary Housing Payment (DHP) is a payment made at the discretion of the Local Authority which can help towards housing costs.  DHP’s are only available to people who are entitled to Housing Benefit, or the housing costs element of Universal Credit, when they are not receiving enough to cover their rent.

    Some examples as to why a tenant can claim DHP are:

    • Housing Benefit has been reduced because of non-dependent deductions or housing costs contributions.
    • Housing Benefit or housing element costs have reduced because of under occupancy (bedroom tax)
    • Housing Benefit or housing costs element have reduced due to the Benefit Cap

     

    DHP’s are also available for one-off costs like a rent deposit, rent in advance or removal costs to help with moving to a more suitable property. DHP’s can not be used to cover an increase in rent due to arrears or to make up the difference if an overpayment is being recovered from a Housing Benefit or housing costs element claim. It also cannot help to cover certain sanctions or reductions in benefit.

    Each Local Authority is awarded a DHP budget from the Government every year and the Local Authority has the ‘discretion’ to decide how to treat any income or other resources a person has when assessing a DHP application.

  • Tax Credits

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    Working Tax Credits

    Working Tax Credit (WTC) is designed to top up your earnings if you work. There have been a number of changes to the rules for qualifying for WTC and they are summarised below.

    To qualify couples with children must have one person working at least 24 hours per week. If both partners are working then they will need to work at least 24 hours between them and one of them must be working at least 16 hours

    Working Tax Credit is no longer available to people aged 50 or over who are returning to work for 16 hours or more after being on benefits for at least six months. To qualify they will need to work at least 30 hours per week whilst the  extra allowance already paid to people over 50 working 30 hours will stop.

    Claimants need to report changes of circumstance immediately as backdating requests have been reduced from three months to one month. Drops in income of up to £2,500 per annum will be ignored and if the drop is more than this then the first £2,500 will be ignored.

    There have also been alterations to the rules relating to increases in household income. Prior to April 2016 if the household income increased by up to £5,000 during the tax year this increase was ignored when calculating the WTC entitlement for that year. However since April 2016 any increase in income of more than £2,500 will be taken into account when calculating the WTC entitlement.

    Child Tax Credits

    Child Tax Credit (CTC) is paid to help people with the costs of bringing up a child. There is no condition of being in work to qualify although how much CTC is awarded is dependent on the household’s income and circumstances.

    From April 2017 there are plans to limit CTC awards to the first two children in the household. However if a person is already claiming tax credits for more than 2 children born before 6 April 2017 then they will be unaffected by these changes. 

    CTC is one of the six benefits that is being phased out and replaced by Universal Credit. This means that a person cannot claim tax credits and Universal Credit at the same time.

    The Tax Credits helpline 0345 300 3900 assists with both new tax credits claims and allows existing claims to be updated.

  • Jobseekers Allowance

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    Job Seeker’s Allowance (JSA) is a benefit for people who are unemployed but capable of work. To get Jobseeker's Allowance you also have to meet several other conditions, which include showing that you are looking for work.

    There are two types of Jobseeker’s Allowance, contribution-based (non-means-tested) and income-based (means-tested). Entitlement to contribution based JSA is dependent upon the claimant’s national insurance contributions and contribution based JSA is paid for a maximum 182 days. After this period the claimant may be entitled to income based JSA.

  • Universal Credit

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    Universal Credit is a payment to help with your living costs. You may be entitled to it if you’re on a low income or out of work.

    Whether you can claim Universal Credit depends on where you live and your circumstances.

    For further information or to make a claim please visit the Universal Credit website.

     

  • Employment Support Allowance

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    Since April 2011, a national exercise has been underway to reassess everyone claiming Incapacity Benefit, Income Support for illness, disability or Severe Disablement Allowance and move them onto either Employment and Support Allowance (ESA) or Job Seekers Allowance (JSA).

    As part of this transition people moved onto ESA who are considered to be seriously ill or severely disabled will be put in the ‘support’ group and receive a higher level of benefit. They do not have to take part in any work focused activity as a condition of receiving benefit.

    Anybody not falling into the ‘support’ group will be placed in the ‘work-related activity group’. This means that they will need to attend work focused interviews as a condition of receiving this benefit.

    Those in the ‘work-related activity group’ are invited to a Work Capability Assessment. This is a medical examination completed by a Department of Works and Pensions’ (DWP) approved Healthcare Professional. If this assessment finds a claimant fit for work they are invited to claim JSA.

    Anyone who disagrees with the assessment decision can appeal. In the first incidence this is first done via a ‘mandatory reconsideration’ request directly to the DWP, and if unsuccessful by a formal appeal to the independent Tribunal Service.

  • Useful Contacts

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    In addition to the support services that Adactus offers to help you manage your rent and your income, there are a number of other organisations that can help you if you need advice and support: 

    Citizens Advice 
    www.citizensadvice.org.uk - Find your local bureau online or in the telephone book

    The Money Advice Service
    www.moneyadviceservice.org.uk - free and impartial advice, set up by the government
    Helpline: 0300 500 5000

    StepChange Debt Charity
    www.stepchange.org - free online debt advice, budgeting and counselling.  
    Helpline: 0800 138 1111

    Direct Gov
    www.direct.gov.uk - Information on managing money and debt

    Turn 2 Us
    www.turn2us.org.uk - benefits calculator and details of grant giving charities

    'Entitledto' for Tenants
    www.entitledtofortenants.co.uk - bedroom tax calculator

    Department of Work & Pensions
    www.dwp.gov.uk
    Helpline: 0800 138 1111

    Pay Plan
    www.payplan.com - Free Debt Management Advice
    Helpline: 0800 280 2816

    Money Advice Trust
    www.moneyadvicetrust.org – Charitable debt advice organisation 
    Helpline - 020 7489 7796

    National Debt Line
    www.nationaldebtline.co.uk - Free debt advice
    Helpline- 0808 808 4000

    Shelter
    www.shelter.org.uk - Free housing and debt advice
    Helpline - 0808 800 4444

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  • 28/02/2018

    Updated by Elesh Makwana on 28/02/2018 13:18:12

    Comment: Added Universal Credit Chapter.

    Details: (show)

    Chapter titled "Employment Support Allowance" order changed from "10" to "11".
    New Chapter added; title:"Universal Credit" image:"" order:"10".

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  • 01/12/2017

    Updated by Elesh Makwana on 01/12/2017 14:30:28

    Comment: Added 'Money Manager for Universal Credit claimants' under universal credit.

    Details: (show)

    Chapter titled "Universal Credit" content changed.

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  • 03/11/2016

    Updated by Athanasios Protopapas on 03/11/2016 17:54:59

    Comment: Added benefit cap to linked documents

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  • 01/09/2016

    Updated by Athanasios Protopapas on 01/09/2016 15:31:06

    Comment: Updated article with latest information

    Details: (show)

    Chapter titled "Changes to welfare reform" content changed.
    Chapter titled "Universal Credit" content changed.
    Chapter titled "Under-Occupation" content changed.
    Chapter title changed from "Capping" to "Benefit Cap".
    Chapter titled "Benefit Cap" content changed.
    Chapter title changed from "Non-dependent deductions" to "Non Dependents".
    Chapter titled "Non Dependents" content changed.
    Chapter titled "Disability Living Allowance (DLA) - Personal Independence Payment" content changed.
    Chapter title changed from "Incapacity benefit / Income Support for illness or disability" to "Discretionary Housing Payment".
    Chapter titled "Discretionary Housing Payment" content changed.
    Chapter titled "Tax Credits" content changed.
    Chapter title changed from "How we can help and support you" to "Jobseekers Allowance".
    Chapter titled "Jobseekers Allowance" content changed.
    Chapter titled "Useful Contacts" order changed from "10" to "11".
    New Chapter added; title:"Employment Support Allowance" image:"" order:"10".

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  • 23/09/2015

    Updated by Elesh Makwana on 23/09/2015 13:27:12

    Comment: Updated 'useful contacts' section.

    Details: (show)

    Chapter titled "Useful Contacts" content changed.

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  • 13/10/2014

    Updated by Athanasios Protopapas on 13/10/2014 16:13:24

    Comment: Money Advice Service link added under useful contacts

    Details: (show)

    Chapter titled "Useful Contacts" content changed.

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  • 14/08/2014

    Updated by Athanasios Protopapas on 14/08/2014 13:35:53

    Comment: Updated connect contact details

    Details: (show)

    Chapter titled "Under-Occupation" content changed.

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  • 13/05/2013

    Updated by Athanasios Protopapas on 13/05/2013 10:43:17

    Comment: Under Occupancy officer email details amended

    Details: (show)

    Chapter titled "Universal Credit" content changed.
    Chapter titled "Under-Occupation" content changed.
    Chapter titled "Capping" content changed.
    Chapter titled "Tax Credits" content changed.

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  • 12/02/2013

    Updated by Athanasios Protopapas on 12/02/2013 16:07:29

    Comment: Added link to Personal Independence Payment guide

    Details: (show)

    Chapter titled "Disability Living Allowance (DLA) - Personal Independence Payment" content changed.

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  • 28/01/2013

    Updated by Athanasios Protopapas on 28/01/2013 10:18:03

    Comment: improved tags

    Details: (show)

    New Tag assigned "welfare changes".
    New Tag assigned "Welfare change".
    New Tag assigned "Welfare changes".
    Tag assignment removed: "welfare".

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  • 13/12/2012

    Updated by Elesh Makwana on 13/12/2012 15:20:13

    Comment: Added Benefit Calculator to linked documents

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  • 10/12/2012

    Updated by Elesh Makwana on 10/12/2012 14:48:59

    Comment: Updated the page with a link to the benefit calculator information article

    Details: (show)

    Chapter titled "How we can help and support you" content changed.

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  • 09/10/2012

    Updated by Athanasios Protopapas on 09/10/2012 12:24:20

    Comment: Improved under occupancy section and linked to relevant article.

    Details: (show)

    Chapter titled "Changes to welfare reform" content changed.
    Chapter titled "Under-Occupation" content changed.

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  • 20/09/2012

    Updated by Athanasios Protopapas on 20/09/2012 12:21:10

    Comment: Added more tags

    Details: (show)

    New Tag assigned "Welfare Reforms".
    New Tag assigned "welfare reforms".

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  • 29/06/2012

    Updated by Admin on 29/06/2012 15:51:45

    Comment: Minor editorial changes

    Details: (show)

    Chapter titled "Changes to welfare reform" content changed.
    Chapter titled "Universal Credit" content changed.
    Chapter titled "Under-Occupation" content changed.
    Chapter titled "Non-dependent deductions" content changed.
    Chapter titled "Disability Living Allowance (DLA) - Personal Independence Payment" content changed.
    Chapter titled "Incapacity benefit / Income Support for illness or disability" content changed.
    Chapter titled "How we can help and support you" content changed.
    New Tag assigned "benefit changes".

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  • 25/06/2012

    Updated by Elesh Makwana on 25/06/2012 14:40:40

    Comment: Updated the links for useful contacts.

    Details: (show)

    Chapter titled "Useful Contacts" content changed.

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  • 22/06/2012

    Updated by Elesh Makwana on 22/06/2012 10:00:19

    Comment: New information page on welfare reform.

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