Welfare

Tax credits income thresholds and universal credit work allowances

The tax credits income threshold will be reduced from £6,420 to £3,850 a year from April 2016. Work allowances in universal credit will be abolished for childless claimants who are not disabled and will be reduced for many other claimants.

Child element in tax credits and universal credit

The child element of tax credits and universal credit will no longer be awarded for third and subsequent children born after 6 April 2017. This will also apply to families claiming universal credit for the first time after April 2017. Transitional protections will be introduced to cover children with disabilities, temporary claims interruptions, multiple births and other special circumstances. Consequential changes will be made in housing benefit from April 2017.

Income rise disregard in tax credits

From April 2016 there will be a reduction from £5,000 to £2,500 in the amount by which a claimant’s income can increase in-year compared with their previous year’s income before their award is adjusted (the ‘income rise disregard’).

Taper rates for tax credits

From April 2016 the tax credits taper rate will be increased from 41% to 48% of gross income.

Employment and support allowance

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.

Tax credits, universal credit and housing benefit – first child

From April 2017 the family element in tax credits and the equivalent in universal credit will no longer be awarded when a first child is born. Transitional protections will be introduced to cover children with disabilities, temporary claims interruptions and other special circumstances.

Parent work conditionality

From April 2017 parents claiming universal credit, including lone parents, will be expected to prepare for work when their youngest child turns two, and to look for work when their youngest child turns three.

Housing benefit entitlement for young people

Those out of work aged 18 to 21 making new claims to universal credit will no longer be automatically entitled to the housing element from April 2017.

The household benefit cap

The benefit cap, which puts a ceiling on the amount of benefits out-of-work working-age families can receive, will be lowered to £20,000, except in Greater London where the cap will be £23,000. The current exemptions to the cap will continue to apply.

Support for mortgage interest (SMI)

From 1 April 2016, the SMI waiting period will be lengthened to 39 weeks, but the capital limit will remain at £200,000. From April 2018, new SMI payments will be made as a loan repayable on sale of the property, or when the claimant returns to work. Payments will accrue interest at a rate tied to the Office for Budget Responsibility (OBR) forecast for gilts.

Benefits and tax credits uprating

Most working-age benefits, child tax credit and working tax credit (excluding disability elements) will be frozen for four years from April 2016.

National living wage

A new premium will be introduced for those aged 25 and over starting at 50p an hour leading to a new national living wage of £7.20 an hour in April 2016. The government’s ambition is for the national living wage to increase to 60% of median earnings by 2020, by which time it is expected to reach over £9 an hour.

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