Universal Credit budget changes will help working families – but not those out of work

3 mins read

Thursday 28 October 2021

Tags: universal credit, budget

Yesterday’s Autumn Budget included changes to the Universal Credit system that will make it more generous for working families – but they won’t do anything to help families who are out of work.

Work allowance increase

Firstly, the Chancellor has announced an increase in the Universal Credit work allowance.

This is an initial amount of earnings that is ignored as income where a claimant is either a parent with dependent children or a disabled person with a limited capability for work. The work allowance is set at one of two figures depending on your circumstances. Whichever figure applies to your claim will be increased by £500 a year (£41.66 per month) from December 2021.

Taper rate increase

The Chancellor also announced that the Universal Credit taper rate will also be reduced from 63% to 55%.

The taper rate is the amount your benefit decreases by as your earnings go up. Currently, for every £1 of excess earnings you have above the work allowance, your Universal Credit award is reduced by 63p. From December you will only lose 55p for every £1 of extra earnings rather than losing 63p. This means that working claimants will be able to keep hold of more of their earnings. 

Other benefits announcements

Other benefits announcements in the budget include:

  • The government now intends to complete the roll-out of Universal Credit to replace legacy benefits by March 2025.
  • Temporarily retaining more generous rules that limit the amount of surplus income that can be treated as covering more than one month for Universal Credit purposes.
  • Increasing the national minimum wage to £9.50 an hour from April 2022.

Contact’s view on these announcements

Contact’s benefits expert Derek Sinclair responded:

“While the changes announced in the budget are undoubtedly good news for working families getting Universal Credit, it doesn’t do anything to help families who are out of work.

“It’s also difficult to understand why similar help hasn’t been given to those working families who still get Working Tax Credit instead of Universal Credit. Families on tax credits who are thinking of moving onto Universal Credit to take advantage of these more generous earnings rules should get advice first. Many families with disabled children would be worse off on Universal Credit due to cuts in payments for disabled children.

“Contact believes the Chancellor should have gone further and increased Universal Credit additions for disabled children, especially for those who are unable to work due to their caring responsibilities and who are facing spiralling costs such as higher heating bills.”

No increase in Carer’s Allowance earnings limit to match National Living Wage rise

As we warned ahead of the budget, the welcome increase in the National Living Wage will spell trouble for unpaid carers unless matched by an increase in the Carer’s Allowance earnings limit.

Derek continues:

“We are also disappointed that there was no commitment to increase the Carer’s Allowance earnings limit in line with the new National Living Wage. Contact will continue to campaign for an increase in the earnings limit to at least £152 per week and for increases in Universal Credit payments for disabled children.”