Autumn Budget 2021: Universal Credit cash boost confirmed for millions of workers but £20 uplift won't return
Millions of workers on Universal Credit will get a cash boost by 1 December, Chancellor Rishi Sunak has announced in his Autumn Budget. The taper rate, which is the amount Universal Credit payments are reduced by when you're in work, will fall from 63% to 55%. In addition, the amount households with children or a limited capacity for work can earn before they're hit by the taper rate will rise by £500/yr.
Read our full round-up of today's big Budget announcements
From minimum wage increases to a shake-up to Air Passenger Duty rates, read about all of today's big announcements in our Autumn Budget 2021 round-up.
Both the taper rate and working allowance changes will take force no later than 1 December 2021 and the shake-up will apply across England, Scotland and Wales, although funding is being provided to the Northern Ireland Executive to implement equivalent measures. We've more info on the shake-up below, but for full details on how the benefit works, who can get it, how much you can get, and how to apply, see our Universal Credit guide.
Mr Sunak said: "[These two changes will] benefit nearly two million families who will keep, on average, an extra £1,000 a year." He added: "A single mother of two, renting, and working full-time on the National Minimum Wage will be better off by around £1,200. And a couple, renting a home with their two children; one working full-time, the other working part-time will be better off, every single year, by £1,800."
However, Mr Sunak stopped short of reintroducing a £20/week uplift for all Universal Credit claimants. This benefit had been introduced to help those on a low income struggling due to the impact of Covid-19 but the uplift was axed at the end of September 2021 - much to the dismay of campaigners.
According to the latest Government data, more than 5.8 million people were on Universal Credit as of 9 September 2021. But the Treasury says Wednesday's combined announcement of the taper rate cut and the work allowance threshold increase will only help 1.9 million people.
How the taper rate impacts Universal Credit payments for those in work
Currently, if you're in work and you meet the criteria to claim Universal Credit (eg, you're on a low income and have £16,000 or less in savings) there's no limit to the number of hours you can work, but the amount you can receive in Universal Credit is docked by 63p per £1 earned. However, the Government has announced that it will cut this rate to 55p per £1, which means you'll keep an additional 8p per pound.
MoneySavingExpert.com founder, Martin Lewis, explained this on Twitter (although note that Martin means £20/wk where he's said £20/yr):
Those impacted by the 'work allowance' will now take home more cash before the taper rate hits
If you (and/or your partner) have either a responsibility for a child or a limited capability for work you can earn a certain amount from work before the same taper rate as above applies. This allowance is £293/mth if your Universal Credit includes housing support or £515/mth if you don't receive housing support.
But in his budget Mr Sunak said that the allowance will rise by £504/yr. This means both work allowances will rise by £42/mth to £335/mth and £557/mth respectively.
The increased 'surplus earnings' threshold to remain until April 2023
In addition, the Budget document confirms that the Government will continue to keep the temporary £2,500 'surplus earnings' threshold for Universal Credit claimants until April 2023, when it will reduce to £300.
Here, if you earn more than £2,500 over the amount you can earn before you receive no Universal Credit payment, you are said to have surplus earnings. But these surplus earnings are taken into account in your next monthly assessment period, which may reduce the amount of Universal Credit you receive, or mean you don’t get any Universal Credit payment that month.
Anyone still on the old benefits system and claiming one of the legacy benefits that Universal Credit is replacing will eventually be switched over to Universal Credit too through a process of 'managed migration'. This process was temporarily paused due to the coronavirus pandemic, but is expected to be completed by March 2025.