One million on Universal Credit to get £420 payrise Rachel Reeves announces in huge benefit change

ONE million families on Universal Credit are set to get a £420 boost as part of the Chancellor’s Autumn Budget.

Rachel Reeves has confirmed she will lower the cap on the maximum level of deductions that can be taken from a person’s benefit payments.

Addressing Parliament, Reeves said: “I can today announce that we are introducing a new Fair Repayment Rate to reduce the level of debt repayments that can be taken from a household’s Universal Credit payment each month from 25% to 15% of their standard allowance.

“This means that 1.2 million of the poorest households will keep more of their award each month lifting children out of poverty and those who benefit will gain an average of £420 a year.”

The Department for Work and Pensions can deduct money from a Universal Credit claimant’s allowance to help them pay back debt.

These can cover a range of debts, such as benefit advances, overpayments of child tax credits, rent and council tax areas, as well as outstanding water and utility bills.

The “trick and treat” Halloween package included:

• A freeze to fuel duty for a 15th consecutive year in a win for The Sun’s Keep It Down campaign
•  A penny off a pint by cutting draught beer duty, but raising booze taxes on other drinks
•  A gloomy forecast of sluggish growth in a blow to Labour’s flagship mission
•  A stamp duty rise for second-home buyers of two percentage points
•  A pay rise for millions as the minimum wage was increased by £1,400 a year
•  A hike to a packet of cigarettes as smoking duties were raised
•  A new tax on vapes ahead of the looming ban on disposable e-cigs
•  Higher taxes on air passenger duty for private jets that hits the wealthy
•  A benefits crackdown with Ms Reeves telling jobless Brits to “get back to work”
•  An increase to the state pension of £473 next year through the triple lock
•  An inheritance tax raid through freezing the rates people pay
•  An increase to the Carer’s Allowance to give cash to 60,000 more carers

Under previous rules, the DWP and third parties could deduct up to 25% of a claimant’s standard allowance to help manage their debt repayments.

But this has now been capped at 15% in efforts to help some of the worse-off homes across the UK pay off what they owe over a longer period.

The measure known as the Fair Repayment Rate will come into effect next April.

As part of the change, single parents may receive up to £39 more of their entitlement each month. For two-parent families this could be up to £62. 

Richard Lane, chief client officer at StepChange Debt Charity, said he “welcomed” the decision.

He explained: “Our recent polling shows that those on UC (35%) are almost four times more likely to be behind on at least one essential bill compared to the wider population (9%).

“In this context, unnecessary debt deductions inevitably cause hardship, leaving vulnerable households to go without essentials or turn to credit to cope.”

Government hope the move, which will target some of the worse-off families across Britain, will help head off criticism over decisions to means-test the £300 Winter Fuel Payment and keep the two-child benefit cap.

Benefit claimants were also told they would be given a 1.7% pay rise next year as part of the Budget.

This is because of a process known as uprating where benefits rise every April in line with September’s inflation figure.

TYPES OF UNIVERSAL CREDIT DEDUCTIONS

There are a number of reasons why the Department for Work and Pensions (DWP) will deduct money from your Universal Credit allowance to help pay off any debts.

Conor Lawlor, benefits expert at Turn2us, says: “These debts can accrue in several ways, including for Universal Credit and other benefit overpayments (even if the overpayment was made in error by DWP), benefit advances and recovering hardship payments.

“The DWP can also deduct on behalf of third parties if a claimant is in debt to them, including for rent and service charge arrears, council tax arrears, court fines, child maintenance, and for utilities like electricity, gas and water.”

However, it’s important to note that not every deduction is compulsory, and some are voluntary.

Here are the six main forms of deductions you could be affected by…

1. ADVANCE PAYMENTS

One of the most common reasons for a Universal Credit deduction is because a claimant applied for advance payments.

When you make a new claim for Universal Credit, you will normally receive your first payment seven days after the end of your first assessment period (four weeks) – this is known as the “five-week wait”.

You can apply for an advance payment of your Universal Credit if you are in financial hardship while you wait for your first payment, for example, if you can’t afford to pay your rent or buy food.

However, as this is a loan, you will be expected to pay it back.

The first deduction is made on the day you get your first payment.

You must usually pay back the advance within:

• 24 months if you apply for the advance if you’ve made a new claim for Universal Credit
• Six months if you apply for the advance because of a change of circumstances

2. BUDGETING ADVANCE

The budgeting advance should not be confused with an advance payment.

Instead, this is an interest-free loan that can be used to cover certain expenses like household furniture, equipment, and clothing.

What you get will depend on how much you need.

The smallest amount you can borrow is £100. You can get up to:

• £348 if you’re single
• £464 if you’re part of a couple
• £812 if you have children

The budgeting loan repayments will be taken automatically from your benefits.

The amount you repay is based on your income.

A budgeting advance should normally be repaid within one year, but this is extendable to 18 months in exceptional circumstances.

3. UNIVERSAL CREDIT OVERPAYMENTS

If you’ve been paid too much Universal Credit you’ll accure an overpayment.

To learn more about an overpayment, sign into your online Universal Credit account, go to your journal, and look for a message about overpayments.

If money is being deducted from your Universal Credit to pay back the overpayment, the amount deducted depends on your circumstances.   

If you are receiving Universal Credit and have no earned income, the maximum amount that can be deducted from your Universal Credit for overpayments is 15% of your standard allowance. 

If you are receiving Universal Credit and have some earned income, the maximum amount that can be deducted from your Universal Credit for overpayments is 25% of your standard allowance.

4. TAX CREDIT OVERPAYMENTS

If you are getting tax credits and you claim Universal Credit, HMRC will be told to stop your tax credits.

However, if you receive tax credits after you have made your claim to Universal Credit this could result in you being paid too much tax credits. 

Universal Credit will take action to get this money back as well as any other tax credit over-payments you have.

HMRC will send you a letter called “Your Tax Credits over-payments (TC1131)”.

This will tell you about any tax credit repayments that will be taken out of your Universal Credit payments.

5. FRAUD AND SANCTIONS

If you deliberately do not provide details about a change in your circumstances that could affect your Universal Credit payments or you give false information, this is fraud. 

A fraud penalty or sanction will reduce your Universal Credit standard allowance.

This can be up to 100% of your standard allowance if you are single, or up to 50% for each person in a joint claim.

If a fraud penalty or sanction is being taken from your Universal Credit payments, no other repayment or deduction will be taken, except for last-resort deductions. 

6. THIRD-PARTY DEDUCTIONS

A third-party deduction is an amount that is taken from your Universal Credit payments and paid direct to the person or organisation you owe money to, such as your landlord or your gas or electricity supplier (Fuel Direct).

Third-party deductions can also be taken, without your permission, for things like:

• Housing costs (for example, rent arrears for your current address)
• Unpaid rates
• Child maintenance

Only three third-party deductions can be taken at any one time.

Universal Credit will send you a message in your online journal when a third-party deduction starts.

Third-party deductions are fixed at 5% of your Universal Credit standard allowance for each third party. 

However, for rent, deductions are fixed between 10% and 20%.

Unlike the other non-voluntary deductions listed above, claimants can initiate deductions for certain bills to help better manage their costs.

For example, you can contact your energy supplier to set up deductions for your ongoing bills through the Fuel Direct scheme.