Universal credit: End of the £20 boost explained

·5 min read
Family walking in the road
Millions of working families are affected

The £20-a-week increase to universal credit, brought in to support those on low incomes during the pandemic, is being withdrawn.

The government says higher wages, rather than taxpayer-funded benefit rises, are a better option - but many MPs had wanted the boost to be permanent.

How is universal credit changing?

In response to the pandemic, a temporary £20 increase to universal credit payments was introduced.

The scheme officially ends on 6 October.

However, the exact date the money will stop being paid will vary depending on which day people usually receive universal credit.

What difference will it make?

The standard allowance for a single person aged under 25 falls back from £79 a week to £59. That's a drop of 25%.

For a couple, where either one of them is 25 or over, their allowance drops from £137 a week to £117 - a fall of 15%.

The calculations come from the Resolution Foundation, a think tank which focuses on people on lower incomes.

Man with bill
Man with bill

Under the rules, universal credit payments become less generous as income rises. So, a £20 a week increase in wages will not make up for the reduced benefits income.

How many people are affected?

Universal credit is claimed by more than 5.8 million people in England, Scotland and Wales.

Almost 40% of them are classed as being in employment.

Writing on Twitter, Resolution chief executive Torsten Bell said that removing the boost would mean "4.4 million households, with 5.1m adults and 3.5m children, will see their incomes fall by £1,000 overnight.

"For 1 million households that will mean an immediate loss of over 10% of their income as we take the basic rate of benefits to its lowest level since 1990."

The charity Citizens Advice has warned that a third of people on universal credit will end up in debt when the extra payment is removed.

It said the average shortfall would be between £51 and £55 a month.

Another charity, the Health Foundation, warned that the cut could lead to poorer mental health and wellbeing for thousands of families.

The government has defended its decision. It says the £20 uplift was always meant to be temporary and that people getting back into work is the best way to tackle poverty.

Why is the timing significant?

The withdrawal of the universal credit uplift coincides with increases in the cost of living.

The Bank of England has forecast that inflation (the rate prices increase) will rise above 4% in the coming months. This pace is unlikely to be matched by wage growth in many sectors of the economy.

Those price rises are being driven by necessities such as gas and electricity.

Grocery and petrol prices are also going up.

Business Secretary Kwasi Kwarteng admitted many people could face a "very difficult winter".

Photo of a woman looking at a receipt
Photo of a woman looking at a receipt

What is universal credit?

Universal credit is a benefit for working-age people, which was introduced to replace six benefits and merge them into one payment. The replaced benefits are:

  • income support

  • income-based jobseeker's allowance (except for some people with severe disabilities)

  • income-related employment and support allowance

  • housing benefit

  • child tax credit

  • working tax credit

Most people who would have made a new claim for these individual benefits now make one for universal credit. It was designed to make claiming benefits simpler.

A single universal credit payment is paid directly into claimants' bank accounts. This happens monthly in England and Wales - although claimants can apply for an alternative payment arrangement if they need additional support. In Scotland and Northern Ireland there is the option of payment every two weeks.

It can be claimed whether you are in or out of work.

Universal credit may not be appropriate or available for everyone. Claiming it can affect other benefits, and it is vital to get some advice - available for free - before applying.

Mother holding young boy's hand
Universal credit can help with childcare costs

Why has universal credit proved controversial?

It is complicated to work out exactly how much universal credit you might receive. Some people, such as those with £16,000 or more in savings, are not eligible.

Others may find what they receive depends on their circumstances, including any income their family has, as well as housing and childcare costs.

It usually takes five weeks from the date of claiming to receiving a first payment, although an advance loan may be possible.

An application for universal credit may put a stop to any tax credits you receive, even if it proves to be unsuccessful.

You may be able to claim a reduction in council tax when on universal credit, and get help with childcare costs. There is also support to pay the rent, which works in different ways across the UK.

In time, there may also be assistance in paying the mortgage, although there are some strict criteria involved.

What other benefits are still available?

The main benefit for anyone losing their job after a period in work is new-style jobseeker's allowance (JSA).

This is worth £59.20 a week, if you are under 25, or £74.70 a week if you are 25 or over.

You can get this for up to six months and it will be paid into your bank, building society, or credit union account every two weeks. Unlike universal credit, your partner's or spouse's income will not affect your claim.

You may be able to claim new-style JSA as well as universal credit.

Where can I go for help?

There is free guidance and advice available, including:

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting