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Benefit reforms from the July 2015 Budget

July 2015 Budget benefit reforms

Benefit and Tax Credit rates

Working age benefits and tax credits will be frozen in cash terms for 4 years from April 2016. Pensioner benefits will be excluded from the benefit freeze and will be protected. Disability benefits, the disability-related elements of tax credits and statutory payments will increase in line with the Consumer Prices Index.

Benefits included in the freeze are:

  • Jobseekers Allowance
  • Employment and Support Allowance
  • Income Support
  • Child Benefit
  • applicable amounts for Housing Benefit and Local Housing Allowance rates (provisions will be made for areas where market rent has risen fastest )

The freeze will also apply to Child Tax Credit and Working Tax Credit excluding any disability elements which are are unaffected by the freeze.

Benefits excluded from the freeze are:

  • Maternity Allowance
  • Statutory Sick Pay
  • Statutory Maternity Pay
  • Statutory Paternity Pay
  • Statutory Shared Parental Pay
  • Statutory Adoption Pay
  • the Employment and Support Allowance Support Group component
  • any disability, carers or pensioners' elements of benefits
  • other disability, carer and pensioner benefits, including PIP and DLA (which will continue to be updated in relation to prices or earnings as applicable)

Child Tax Credit – 3 or more children

The Chancellor announced that from April 2017 support provided through Child Tax Credit will be limited to 2 children, so that any subsequent children born after April 2017 will not be eligible for this support.


Child Tax Credit – family element

From April 2017 new claims for Child Tax Credit will not be eligible for the ‘family element’ of £545 per year. In effect this will mean that families with one or more children born before April 2017 will continue to get the family element but first children born after this date will not get the family element.


Tax Credits

The income that a household can earn before the tax credits they receive start to fall will drop from £6,420 to £3,850 from April 2016. For every £1 you earn above this, your benefit will be reduced by 48p compared to the current rate of 41p.

The following groups will be exempt from the changes to Tax Credits and Universal Credit (UC):

  • Those moving from tax credits to UC
  • those who come to UC after less than six months off benefits (tax credits or UC)
  • or any new claims from those already on UC, automatically required by new household formation (e.g. a lone parent with three children who forms a couple with someone not currently entitled to UC).

Housing Benefit – family premium

Withdrawal of the family element in Housing Benefit will take effect from April 2016. This will affect both new claims and new births from April 2016.


Housing Benefit backdating

From April 2016, Housing Benefit claims will be backdated for a maximum of 4 weeks.


Housing Benefit for under 21s

A minimum age of 21 will be introduced for new claims for Housing Benefit (or the housing element of Universal Credit) from April 2017. There will be exceptions for parents, vulnerable groups and people who could previously afford their rent without assistance.

Those in the following situations are also excluded from this reform:

  • Care leavers
  • couples where one is over 21 or falls into another exempt group
  • claimants responsible for a child
  • claimants living in temporary accommodation
  • claimants living in specified accommodation, which is any housing that provides care, support, or supervision (as these will continue to be funded by Housing Benefit)
  • newly unemployed claimants who were continuously in work for the preceding six months (those who do not find work again within six months will no longer be exempt)
  • claimants already in receipt of housing benefit.

Universal Credit

The child element of Universal Credit will be reduced in the same way as Child Tax Credit – from April 2017 new claims will be limited to 2 children and from the same date new claims will not be eligible for the ‘first child premium’. Similarly the work allowance in Universal Credit will be reduced from April 2016 – for disabled people and people with children 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.

The following groups will be exempt from the changes to Tax Credits and Universal Credit (UC):

  • Those moving from tax credits to UC
  • those who come to UC after less than six months off benefits (tax credits or UC)
  • any new claims from those already on UC, automatically required by new household formation (e.g. a lone parent with three children who forms a couple with someone not currently entitled to UC).

Benefit Cap

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. This cap of £26,000 per year is to be reduced to £23,000 for households living in Sutton.

Households will be exempt from the Benefit Cap if someone receives one of the following benefits:

  • Disability Living Allowance
  • Personal Independence Payment
  • Attendance Allowance
  • Industrial Injuries Benefits
  • the support component of the Employment and Support Allowance
  • War Widows and War Widowers pension
  • those entitled to Working Tax Credit.

Employment and Support Allowance work-related activity group

From April 2017 new claimants of Employment and Support Allowance who are placed in the Work-Related Activity Group will receive the same rate of benefit as those claiming Jobseeker’s Allowance. This means a reduction of £30.00 per week.


Reduction in help with mortgage interest

If you are in receipt of Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance or Pension Credit you may be entitled to help with your mortgage interest. This help is currently provided in the form of a direct payment to your lender. The Chancellor announced that from April 2018 this help will take the form of a loan to the claimant which they will have to repay when they return to work or when the property is sold.


Work conditionality for parents with a child aged 3+

From April 2017 parents in receipt of benefits (including lone parents) will be expected to look for work when their youngest child turns 3.


Free TV licence for over 75 year olds

There will be a change in the way the free TV licence for those 75 or over is funded, with the cost being passed by the government to the BBC. This amounted to £608 million in 2013//2014 and the BBC will need to include it in their own budget from 2017/2018.