How will changes to working tax credit, housing benefit and out of work benefit affect you?
The government announced several changes to welfare benefits in its July 2015 budget. Here we explain the changes that will come into effect from April 2016.
Working Tax Credit
This is an in-work payment made to low-paid people working a minimum number of hours, with additions based on family and disability circumstances. There are a number of proposed changes from April 2016:
- Working Tax Credit payments begin to reduce once an earnings threshold is reached. The current threshold is £6,420 per year, but this will be reduced to £3,850.
- After the threshold is reached, Working Tax Credits will be reduced by 48p in every £1 earned. (The present reduction is 41p in every £1 earned.)
- Currently, if your earnings rise by less than £5,000 within the year, this won’t affect your claim. From April 2016, you must report an earnings rise if it exceeds £2,500, and the amount of Working Tax Credit you receive will be reduced.
Ms P is a lone parent working 16 hours, earning £530 per month. At present her Working Tax Credit is £76.34 per week.
From April 2016, assuming her circumstances remain the same, her Working Tax Credit falls to £1.34 per week.
Employment Support Allowance & Job Seeker's Allowance
Claimants under state pension age who claim Job Seeker’s Allowance (JSA) or Employment Support Allowance (ESA) will not see an increase in these benefits for the next five years.
The exception to this rule will be for disability benefits and carer benefits, which will increase each year.
Pensioners are not affected by this freeze.
Mr J has a disability that prevents him from working, so he receives Employment and Support Allowance (ESA) with a support component.
This gives him an income of £109.30 per week, broken down as £73.10 for the ESA and £36.20 for the support component.
From April 2016 the ESA element (£73.10), will not increase with inflation. However, the support component (£36.20) will increase by the CPI rate of inflation.
Housing Benefit helps people on low incomes to pay their rent. At present, there are some circumstances in which a claim might be backdated for up to six months. From April 2016, this will be reduced to four weeks.
Mr P, who has severe learning difficulties, moved into a new flat six months ago but didn’t realise that he had to fill in a claim for housing benefit.
If he puts in a claim now, it will be backdated for the full six months. However, if he puts in a claim after April 2016, it will be backdated for only four weeks.
For further details, please contact Peabody’s Welfare Benefits team on 0800 022 4040 (free from BT landlines) or 020 7021 4444, or:Request a free benefits advice consultation