As you may be aware, there are plans for further changes to the welfare benefits system. The main changes are highlighted below to enable you to keep track of what’s happening and when, so you can plan accordingly and be sure you will be able to keep your budget on track. This can help you start to plan ahead and minimise the impact any cuts may have on your household finances. For more information on Budgeting or Increasing your Income, see the relevant sections of our Managing Money area.
Changes in 2016
Benefit and Tax Credit rates frozen – The main rates of working age benefits and tax credits will be frozen in cash terms for 4 years from April 2016. Pensioner benefits are excluded from the benefit freeze and will be protected.
Disability benefits, the disability related elements of tax credits and statutory payments including Personal Independence Payment, Attendance Allowance, Disability Living Allowance, Employment and Support Allowance (Support Group only), Maternity Allowance, Statutory Maternity/Paternity Pay and Statutory Sick Pay, will be updated in line with the Consumer Prices Index (CPI).
Benefit Cap reduced – There is currently a benefit cap in place restricting the amount in certain benefits that a working age household can receive. Any household receiving more than the cap has their Housing Benefit reduced to bring them back within the limit. You can visit the entitledto website for more information on the Cap.
Housing Benefit – There will be a withdrawal of the family premium in Housing Benefit (£17.45 when a claimant has one or more dependent children) which will take effect from 1 May 2016. removal of the family element premium will affect both new claims and new births from 1 May 2016. For further details visit the entitledto help page.
Tax Credit income disregard cut – At the moment, if your household income increases by up to £5,000 during the tax year this increase is ignored when calculating your entitlement for the year. From April 2016, this will be reduced so that any increase in income of more than £2,500 will be taken into account.
New State Pension – For those reaching pension age from April 2016 a new State pension is being introduced to replace the basic State Pension and State Second Pension. This affects all women born on or after 6 April 1953 and all men born on or after 6 April 1951.
The new pension is designed to be much simpler and will consist of a single amount to be awarded in full if you have 35 qualifiying years of National Insurance Contributions. If you don’t have the contributions required for the full pension, as long as you have a minimum number of qualifying years (between 7 & 10) you will receive a pro rata amount. If you don’t have the minimum number of qualifying years you will not qualify for the single tier pension. Any contributions made under the current pension system can be used toward the new state pension.
If you qualify for the full amount you will receive £155.65 a week. For those who do gain in state pension, for some this will be offset by reductions in means-tested benefit entitlements and if you fall under the new sigle tier pension system you will not be able to claim the Pension Credit Savings credit. To find out more see Age UK’s ‘What the new pension reform means for you’
Universal Credit – The work allowance in Universal Credit, the amount you can earn without your benefit being affected will be reduced from April 2016. For disabled people and people with children it will be reduced to £192 per month if you have housing costs and £397 per month if you don’t have housing costs. The work allowance will be abolished altogether from April 2016 for non-disabled, childless claimants meaning your benefit is reduced as soon as you earn.
The Child Care cost element of Universal credit currently pays for 70% of your registered childcare costs up to a monthly limit of £532 for one child and £912 for two or more children. From 11 April 2016, this will increase so that you will be able to claim back up to 85% of your paid out childcare costs up to a monthly limit of £646 for one child or £1108 for two or more children.