The changes to Universal Credit were announced in the Budget, and will see the “repayment cap” lowered from the current 40 percent maximum. This move comes shortly after it was revealed 850,000 people lose part of their Universal Credit paying back debt or advanced payments. Of the 850,000, close to half had 20 percent taken off their payments, while nearly a third 238,000 saw deductions of 31-40 percent. However in good news for claimants, the changing to the “repayment cap” means some recipients will keep more of their money.
What is the Universal Credit “repayment cap”?
This is the maximum amount the DWP can deduct from benefit payments to pay back rent arrears, advanced payments or sanctions.
Advanced payments are offered to new claimants of Universal Credit who are struggling financially while they wait for their first payment – often a period of five weeks.
The advanced payment is an interest free loan which must be paid back in instalments from future Universal Credit payments.
Deductions begin on the first day of payment and must be paid back within 12 months except in “exceptional circumstances”.
Under current rules, those repaying an advanced payment will see a deduction of 15 percent in monthly payments.
What is changing under the new regulation?
Those affected by a combination of repayments – rent arrears and/or sanctions alongside advanced payments – will see the amount they receive change.
Currently, the DWP an take deductions of up to 40 percent of the monthly standard allowance of Universal Credit.
From October 2, the “repayment cap” will be reduced to 30 percent. This means those paying the maximum should receive more money each month from October 2.
The DWP have confirmed the change will affect both existing and new claimants of Universal Credit.
However, those who only repay their advance payment will not see the amount the receive change, as the repayment threshold will remain at around 15 percent in these cases.
In all cases, charges and repayments must be paid within a 12 month period, but the DWP has previously said this would be extended to 16 months – but not until October 2021.
Who is eligible for Universal Credit?
Universal Credit is a payment which may be made in order to help with living costs.
It replaces six types of benefits, known as legacy benefits. These are Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance (JSA), income-related Employment and Support Allowance (ESA), and Working Tax Credit.
Those who get the severe disability premium, or are entitled to it, or got or were entitled to it in the last month and is still eligible for it, cannot claim Universal Credit.