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Budget 2021: What do the changes to the Universal Credit Rules mean for me?


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Today’s autumn budget announcement includes changes to the universal credit rules, which is good news for low-income families. If you take Universal Credit and hope to get back to work, it could mean more money in your pocket.

Here, I looked at the rule changes in more detail and investigated what the changes might mean for you

What is the change in Universal Credit Rules?

Sage Sunak has announced in his autumn budget that the complex tapping rules of Universal Credit will be changed. The pressure will be reduced from 63% to 55% by December 2021. This means that if you claim universal credit and you work or go back to work, you may have more money in your pocket.

Change means you can keep more of your cash because you won’t lose as much universal credit when you start making money.

Under the old system, you’ll only get an extra 37p in your pocket for every £ 1 you earn. This is because 63p will be deducted for every 1 you earn (after income tax, national insurance and pension contributions). With the change of rules, you will keep 45p of every 1 you earn, so you can keep your money even more.

How does Universal Credit Taper work?

Universal Credit Taper works like this:

  • Once you earn more than £ 293 per month, you start losing universal credit. If you do not receive housing assistance, you can earn up to 15 515 per month before you start losing Universal Credit.
  • The amount you currently lose is 63% of your earnings above £ 293 per month. This is changing to 55% in December.
  • You will get less money on your universal credit payment because it will deduct the taper amount.

How Universal Credit Changes Can Affect You?

The universal credit you get depends on a variety of factors, such as whether you are a couple, whether you have children, whether you are disabled, and the level of your savings. Let’s take a look at a couple of examples.

If you receive a universal credit of more than £ 445 per month and you currently carry £ 1,000 per month (after taxes, national insurance and pension contributions), you may receive an additional £ 56 per month after changing the rules. Because at the current low rate you lose £ 445 per month (£ 1,000 minus £ 293 = £ 707; £ 707 x 63% = £ 445). Under the new tapping rate, you lose মাসে 388 per month (£ 1,000 minus £ 293 = £ 707; £ 707 x 55% = £ 388).

If you get more than £ 760 in universal credit per month and currently carry £ 1,500 per month, you’ll see a bigger cash boost of £ 97 per month. Because under the current taper rate you lose 60 760 per month (£ 1,500 minus £ 293 = £ 1,207; £ 1,260 x 63% = £ 760). Under the new system, you’ll lose £ 663 per month (£ 1,500 minus £ 293 = £ 1,207; £ 1,207 x 55% = £ 663).

Who will benefit the most from the changes in the autumn budget?

The changes in the autumn budget will benefit low-income families the most This is because they have the highest level of universal credit and will not lose this benefit so much when they see their wages increase.

The changes will not benefit people who are out of work because the public credit they receive is not affected. For those who can’t work, it won’t make up for Universal Credit’s recent £ 20 reduction per week.

Please keep in mind that tax treatment depends on your personal circumstances and may change in the future. The content of this article is for informational purposes only. Not intended to do this, nor does it constitute any kind of tax advice. Readers are responsible for performing their own due diligence and seeking professional advice before making any investment decisions.

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