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Universal credit

ICAEW Tax Faculty provides analysis of the announcements relating to universal credit and state benefits in the 2018 Budget.

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The Chancellor was under considerable pressure to introduce changes to universal credit (UC), particularly to ease the migration from existing benefits. He announced some limited changes while confirming the government’s intention to proceed with implementing the policy.

The work allowance, the amount that certain claimants can earn before their award begins to be withdrawn, is to be increased by £1,000 per annum from April 2019. This partly reverses the reduction of the work allowance announced in summer Budget 2015.

The implementation schedule for those who remain on existing benefits has been further pushed back. This migration process is now due to begin in July 2019 and will not be concluded until at least December 2023.

The impact of the complex minimum income floor and surplus earnings rules was addressed in a very limited way.

Self-employed claimants transitioning to universal credit will benefit from a 12-month grace period in which the minimum income floor rules will not apply (instead of six months previously proposed) but this is only a temporary reprieve.

The fundamental concern about the minimum income floor is that it fails to account for fluctuating earnings or one-off large business expenses, leading to a situation where a self-employed claimant with fluctuating earnings can receive substantially less UC than an employed claimant earning a similar annual income above the level of the current minimum income floor. This was not addressed.

The scope of the surplus earnings rules is to be temporarily reduced; the rules will affect earnings spikes of above £2,500 until April 2020 before reverting to £300.

The two-week run-on of support for housing benefit claimants transitioning to UC, which was announced at Autumn Budget 2017, is to be extended to cover income-based jobseekers allowance, income-related employment and support allowance and income support claimants. This change will apply from July 2020.