Budget 2020 – Universal Credit advance loans to be paid back over TWO YEARS
STRUGGLING families on Universal Credit who take out an advance payment will soon be able to pay it back over two years.
The maximum amount that can be taken off your benefits to pay it back is also being reduced from 30 per cent to 25 per cent.
Hidden in the Budget document, the changes mean that households will be able to keep hold of more of their monthly benefits as they have longer to repay the loan.
Currently, claimants have just 12 months to pay off advance payments in instalments, which are automatically deducted from their monthly benefits.
The loans are worth up to one month's worth of benefits payments and are offered to vulnerable households to get them through the five-week wait for the first hand out.
But these changes the won't come into effect until October 2021 though.
Universal Credit calculators
TRYING to work out how much Universal Credit you can get can be overwhelming.
There are so many different elements that can affect your claim that it makes the whole process even more complicated.
There are a number of free calculators that you can use to help you get an estimate, such as and
You will need:
- Details of all your income, such as existing benefits, tax credits, earnings from employment and your pensions,
- Details of your partner's income if you're married, in a civil partnership or living with someone as a couple. You will be assessed as a couple'
- Information on any savings you have,
- How much you pay in Council Tax per year and whether you get any discounts, reductions or exemptions,
- Details of your rent or mortgage payments,
- Employment and income information about anyone else living with you, such as grown-up children,
- Details about your Carer's Allowance if you receive it.
You need to make sure that the information is as accurate as possible so that you can get the truest estimate.
While it's a step in the right direction, The Sun's Make Universal Credit Work campaign is still calling for the five-week wait to be reduced.
A shorter waiting period cuts down the need to take out a loan and reduces the amount households may need to borrow.
The waiting time has been slammed by experts and charities for pushing already vulnerable people further into debt.
'We need to ditch the five-week wait'
DEANNA Williams, 42, has been receiving Universal Credit since June 2018.
DEANNA Williams, 42, has been receiving Universal Credit since June 2018.
In 2018 she was diagnosed with a brain tumour and could no longer work. Now her only income is from Universal Credit.
The 47-year old from Nottinghamshire said her first payment took five weeks and during this time she had to take out an advance and pay it back.
A big change announced in the Budget was that advance loans for Universal Credit would now be paid back over two years instead of one.
Deanna said: “I agree with The Sun, people should not be waiting five weeks for their first payment.
“This forces them to take a loan and this didn’t happen on the older system. It’s putting more people into unnecessary debt.
When she was working, Deanna had two jobs as a cleaner and was also a relief support worker.
She lives with her partner Keith, 61, and children Freya, aged 17, and Skye, aged 12, in a rented house.
Deanna receives £1,508.56 a month after £445.48 is deducted for Keith’s pension, repaying a Universal Credit loan, and her care allowance.
She said: “It’s good to see the government putting plans in place because of the coronavirus but this should be the case anyway no matter what the reason for someone being unwell.
“When I became ill I did not qualify for sick pay and claiming UC was not easy.”
Deanna also thinks the minimum income floor should be removed permanently.
She said: “People should not be punished for wanting to work and people should not punished for being genuinely ill or disabled.
“There needs to be a better balance created and things like the ESA should always be paid from day one.”
On the news of self employed workers getting greater access to benefits Deanna said: “I think it’s good the self-employed will get help too as they never get much, but I feel it should be more of a permanent thing.”
Research by StepChange Debt Charity found that at least one in 10 hard-up families in receipt of benefits has had to turn to a high cost credit and loan sharks to help them meet the cost of living as a result of the applying to the new system.
The Trussell Trust found that cash-strapped Brits are relying on food banks for up to two years after they apply for the benefits due to the wait.
Reducing how much can be deducted from payments by 5 per cent will also help families manage their household budgets.
Deductions can be made to repay debts you have with other firms like water or energy companies. These are called "third party" debts.
The Sun wants to Make Universal Credit Work
UNIVERSAL Credit replaces six benefits with a single monthly payment.
One million people are already receiving it and by the time the system is fully rolled out in 2023, nearly 7 million will be on it.
But there are big problems with the flagship new system - it takes 5 weeks to get the first payment and it could leave some families worse off by thousands of pounds a year.
And while working families can claim back up to 85 per cent of their childcare costs, they must find the money to pay for childcare upfront - we’ve heard of families waiting up to 6 months for the money.
Working parents across the country told us they’ve been unable to take on more hours - or have even turned down better paid jobs or more hours because of the amount they get their benefits cut.
It’s time to Make Universal Credit work. We want the government to:
- Get paid faster: The Government must slash the time Brits wait for their first Universal Credit payments from five to two weeks, helping stop 7 million from being pushed into debt.
- Keep more of what you earn:The work allowance should be increased and the taper rate should be slashed from from 63p to 50p, helping at least 4 million families.
- Don’t get punished for having a family: Parents should get the 85 per cent of the money they can claim for childcare upfront instead of being paid in arrears.
Together, these changes will help Make Universal Credit Work.
Join our or email [email protected] to share your story.
Putting a cap on it means you get to keep a bit more of your benefit although you'll be repaying the debts over a longer among of time.
For example, if a claimants currently receives £670 a month, but owes £1,000 in unpaid water bills, he may have previously paid back £201 a month.
That will leave him with £469 of his Universal Credit payment to live off.
But with the new 25 per cent cap in place, he will now only pay a maximum of £167.50 a month, leaving him with £502.50 of his benefit payment.
David Samson, Welfare Benefit Specialist at Turn2us, said: "Deductions can still take away a huge chunk of income from vulnerable claimants which can force them into poverty, hunger and homelessness.
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"We urge the government to remove the five week wait for Universal Credit which will eliminate all deductions from "advance" payments, to exercise more discretion in
recovery of overpaid benefits, and also to limit more tightly the total amount that can be recovered for so called "third party deductions"."
It was also announced in the Budget today that millions of self-employed workers affected by the coronovirus outbreak will be able to get sick pay through Universal Credit.
Employees who receive the National Living Wage will see their salary increase to £10.50 an hour by 2024, the Chancellor also told MPs.