Budget 2021: Universal credit £20/week uplift to continue for a further six months

The suspension of the universal credit minimum income floor has also been extended until August. That's good news for many self-employed claimants, as it means you're not assumed to be earning at least the minimum wage when the amount you're due is calculated. Without the floor in place, those earning less than the minimum wage are assessed on actual income – so get more help. We've details below – see our Coronavirus Universal Credit & Benefits guide for full help.

Temporary boosts to universal credit and working tax credit will remain for now

Today's news follows weeks of political debate about the extension of a temporary boost to benefits, which was brought in last year in response to the pandemic. Here's what's been confirmed – crucially, in both cases you don't need to do anything to get the extra money, as payments will be made automatically:

• Universal credit claimants will continue to get the £20/week uplift until the end of September. This had been due to end on 6 April 2021, but will now last until the end of September 2021. The continued uplift applies to all new and existing claimants across England, Scotland and Wales, while funding has been made available to the Northern Ireland Executive to match this uplift. 

  The overall amount of universal credit you receive depends on various factors, but the uplift means that a single person aged 25 or over would get a standard monthly payment of £409.89 instead of £317.82, for example.

• Working tax credit claimants will get a one-off £500 payment by mid-April. Due to the nature of working tax credit, these claimants won't get a weekly payment but the equivalent, which is a one-off payment of £500. This applies to all claimants across the UK who were in receipt of working tax credit as of 2 March 2021.

The Government has confirmed that technically-current working tax credit claimants who switch to universal credit may be eligible to get both the £500 payment in April and the £20 uplift after they've switched – but if you do this you can't switch back to working tax credit, so it's crucial you ensure universal credit is best for you first. Use our Benefits Calculator or speak to benefit experts, such as charity Turn2Us, for help.

Most new benefit claimants now have to apply for universal credit, while other older legacy benefit claimants are also being moved on to this new system. As of November 2020, 4.9 million households were receiving universal credit according to the Treasury, while in December 2020, 1.5 million households received at least working tax credit.

The universal credit 'minimum income floor' won't return until August

Another key change announced today is that the universal credit 'minimum income floor', which was temporarily suspended on 6 April 2020 and had been due to come back into force at the end of next month, will now continue to be suspended until August 2021.

This is good news for many who are self-employed and on universal credit, and is something we've highlighted before. The minimum income floor is basically an assumed level of earnings. When calculating how much universal credit you'll receive, the Department for Work and Pensions assumes the self-employed earn at least roughly minimum wage. Without the floor in place, those earning less than that level are assessed on actual income – so get more help.

The Treasury said today the minimum income floor will be "gradually" reintroduced from August but it couldn't provide any more detail at this stage. We will update our Coronavirus Universal Credit & Benefits guide when we know more. Even after 1 August 2021, Department for Work and Pensions work coaches will be given discretion to not apply it on a case-by-case basis where workers' income continues to be impacted by Covid-19.

Other benefits changes – in brief

A number of other changes to the way benefits are calculated were announced today. We've a brief summary below, but see our Coronavirus Universal Credit & Benefits guide for more help. 

• Universal credit advances (essentially loans) won't need to be repaid for 24 months from April 2021. That's an extension – they don't need to be repaid for 12 months at present.

   

• The maximum universal credit deduction rate will fall from 30% to 25% from April 2021. Universal credit payments are based on a standard rate, but your payments can be reduced based on your individual circumstances. The change to how much can be deducted had been due to take force from October 2021, but has been brought forward.

• The 'higher surplus earnings threshold' for universal credit will remain at £2,500 until April 2022. After this, it will revert to £300. This is complicated, but essentially if you earn more than £2,500 above a threshold specific to your circumstances, it can count towards your earnings and mean you get a smaller universal credit payment or that your payments stop altogether.

• Working tax credit claimants' 'normal' working hours will continue to be taken into account. Anyone who has been furloughed, or experienced a temporary reduction in their working hours as a result of Covid-19, will continue to have their normal hours used to calculate their working tax credit payments. This had been due to end eight weeks after furlough closed (even for those not on furlough), but HMRC has confirmed this now applies to the new extended furlough end date of 30 September. It means normal working hours should still be taken into account until 25 November.