WORKING tax credits will jump by £1,040 this week to help families struggling in coronavirus lockdown.
Child benefits and universal credit payments are also set to rise.
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The basic element of working tax credits has increased to £3,040 as a four-year freeze finally comes to an end.
The increase will run until April 5, 2021 and will mean those who qualify will get an extra boost.
It comes as thousands of employees across the UK face financial uncertainty during the pandemic.
The amount a claimant can benefit from the credit will depend on their circumstances, but the increase could mean up to an extra £20 each week.
Chancellor Rishi Sunak laid out a number of temporary measures as part of his Budget earlier this month, which will see another £20 a week added to universal credit payments on top of the previously announced rise.
The changes include increases in the Universal Credit standard allowance and Working Tax Credits, as well as a suspension of the Universal Credit minimum income floor.
Chancellor Rishi Sunak says four million vulnerable households will benefit from today’s changes, below we explain all you need to know.
How the changes will affect you
Standard allowance and working tax credits
The standard allowance – the amount that everyone is entitled to if they’re accepted on Universal Credit – will rise by roughly £20 a week for the next 12 months adding £1,000 over the year.
The DWP says the standard rate will be increased by £86.67 per month on top of the planned annual uprating.
This means claimants will be up to £1,040 better off, but the exact amount you’ll get will depend on your individual circumstances.
The Universal Credit standard allowance currently ranges between £251.77 and £498.89 depending on your age and whether or not you’re part of a couple.
This is how the standard allowance is changing, as of today:
- Single, under 25 – rising from £251.77 to £342.72 (equivalent to £4,112.64 a year)
- Single, 25 or over – rising from £317.82 to £409.89 (equivalent to £4,918.68 a year)
- Couple, joint claimants both under 25 – rising from £395.20 to £488.59 (equivalent to £5,863.08 a year)
- Couple, joint claimants, one or both 25 or over – rising from £498.89 to £594.04 (equivalent to £7,128.48 a year)
Working tax credit is being raised by the same amount, on top of the increase linked to inflation.
The basic amount for working tax credit is currently up to £1,960 a year but will rise to £3,040 for the next 12 months.
You may be entitled to extra money on top of this, depending on your circumstances and income, but it’s only the basic element that’s receiving an additional boost by the government.
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Yet the DWP says the increase could mean up to an extra £20 each week.
The raised amounts should kick in automatically for everyone who is eligible, meaning you shouldn’t need to do anything if you’re entitled to more money.
It’ll also apply to both new and existing claimants for 12 months.
Minimum Income Floor (MIF)
Temporarily removing the Universal Credit Minimum Income Floor (MIF) will help self-employed workers who will lose income either due to self-isolating or as a result of the lockdown.
Universal Credit is calculated for self-employed workers whose business has been running for more than 12 months by predicting what they may earn. This is known as the MIF.
It’s worked out by multiplying the national minimum wage with the number of hours you agreed to work.
How do these benefits currently work?
Universal Credit replaces six benefits – including Working Tax Credit and Housing Benefit – with one monthly payment.
You may be entitled to it if you are on a low income or out of work, which is why the government is suggesting those who’ve been forced out of a job due to coronavirus should apply for it.
You get your standard allowance, plus potentially extra on top if you have children, a disability or health condition, or you care for someone with a disability.
Working Tax Credit, meanwhile, depends on the hours of paid work you do each week, plus your income and circumstances.
Again, you may then get extra “elements” on top depending on whether you’re in a couple, have children, a disability, and how many hours you work.
How do I apply for Universal Credit?
As JobCentre phone lines are currently extremely busy, new claimants are asked to apply for Universal Credit online.
You can do this by the GOV website – you’ll need information about your income, your housing situation and proof of your identity.
We’ve explained the best time to claim for Universal Credit when it’s quietest online.
As Working Tax Credit has mostly been replaced by Universal Credit, you can only make a new claim if you get a severe disability premium.
Find out more information on the GOV website
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