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Upcoming Changes
As you may be aware, the new Coalition Government has announced plans for a series of changes to the welfare benefits system since they came to power. The main changes are highlighted below to enable you to keep track of what’s happening and when, so you can plan accordingly and so be sure you will be able to keep your budget on track.
Bear in mind that many of these changes are a good way off, so there is plenty of time to think about ways to deal with any reduction in income that you may suffer as a result. Many have also not been approved by parliament yet, meaning there is a chance they may not happen at all. It is difficult to see exactly what impact the changes may have until they have been approved and more details released on how they will be implemented. In the meantime, hopefully the following guide will provide an idea of which changes may impact you and your family and when they are due to come into force. This can help you start to plan ahead and minimise the impact any cuts may have on your household finances. For more information on Budgeting or Increasing your Income, see the relevant sections of our Managing Money area.
October 2010
Support for Mortgage Interest – The rate paid to homeowners has been dropped to the Bank of England’s  published monthly Average Mortgage Rate. For more information see this website.
November 2010
Contribution conditions for ESA and JSA – New claimants will have to have paid more National Insurance contributions in order to qualify for contributions based ESA or JSA. For more information about National Insurance and benefits see this website.
December 2010
Child Trust Funds – No new funds can now be set up, and existing funds will receive reduced payments. For more information on Child Trust Funds see this website.
January 2011
Education Maintenance Allowance – There will be no new claims for EMA allowed after 1st January 2011. Existing claims will be paid for the 2010/2011 academic year but no claims will be accepted for 2011/2012. For more information on the closure of the EMA scheme, see http://www.direct.gov.uk/en/EducationAndLearning/14To19/MoneyToLearn/EMA/DG_066955
Health in Pregnancy Grant – No new claims. See this website for more information.
 Help with Mortgage Interest – Help limited to 2 years for those on JSA. However the waiting period before you can claim is reduced to 13 weeks and the eligible mortgage capital limit is increased to £200,000. For more information see this website.
VAT – VAT increased to 20%. Incapacity Benefit (IB) and Income Support (IS) – Will no longer be linked.
February 2011
Reassessment of existing Incapacity and Income Support claims. Claimants moved onto Employment and Support Allowance (ESA) – Claimants of Income Support and Incapacity Benefit will be called for assessment from February and decisions will be made from March onwards. Claimants may either be found ‘fit for work’, or transferred onto ESA. For more information see http://www.direct.gov.uk/en/DisabledPeople/FinancialSupport/esa/DG_171891
April 2011
Housing Benefit – Increase in non-dependent deductions – If you have someone living with you who you are not financially responsible for (known as a non dependent), for example a grown up son or daughter, another relative or a friend, then you will have a deduction made from your housing benefit. This deduction will increase from January. See http://www.direct.gov.uk/en/Nl1/Newsroom/DG_192415 for more information.
Housing Benefit – no new award of higher family premium for children under one – this will mean a drop in income for families with children under one.
Discretionary Housing Payments – The budget for discretionary housing payments will be increased by £10 million, meaning more money should be available to help those hardest hit by the change to Local Housing Allowance (LHA) outlined below.
Local Housing Allowance (LHA) – End of £15 excess – The £15 weekly excess that some are eligible for will be removed. This will affect all new claims for LHA from 1st April 2011 where the LHA is above their contractual rent, the maximum HB payable will be their contractual rent. It will affect existing LHA claimants on the next ‘anniversary’ of when you made your claim for LHA after 1st April 2011 or even sooner if you move house or your LHA needs to be reassessed. For more information see http://www.direct.gov.uk/en/Nl1/Newsroom/DG_192415.
 Local Housing Allowance (LHA) – Caps introduced and 5 bed rates got rid of – Limits will be introduced so that Local Housing Allowance does not exceed: - £250 a week for a one bedroom property (including shared accommodation)
- £290 a week for a two bedroom property
- £340 a week for a three bedroom property
- £400 a week for a four bedroom property
The maximum rate of Housing Benefit will be limited to the rate for a 4 bedroom property; the rate for a 5 bed property will be abolished. This will affect all new claims from 1st April 2011. For existing claimants the change is expected that to take effect 9 months after their next LHA ‘anniversary’ date following 1st April 2011. For more information see http://www.direct.gov.uk/en/Nl1/Newsroom/DG_192415.
Local Housing Allowance (LHA) – Change in way allowance is set – The Local Housing Allowance will now be set at the 30th percentile of rents in each Broad Rental Market Area, rather than the median as currently. This means that only the cheapest 30% of privately rented properties will be fully eligible for Housing Benefit. This will affect all new claims from 1st April 2011. For existing claimants the change is expected that to take effect 9 months after their next LHA ‘anniversary’ date following 1st April 2011. For more information see http://www.direct.gov.uk/en/Nl1/Newsroom/DG_192415.
Local Housing Allowance (LHA) – Payment direct to landlord – Payment of Housing Benefit is usually automatically set to go to the claimant, however from April it will be possible for Housing Benefit to be paid directly to the landlord where it is felt this may help the claimant maintain their tenancy. For more information see http://www.direct.gov.uk/en/Nl1/Newsroom/DG_192415.
Local Housing Allowance (LHA) – Extra room for non-resident carer – An extra room will now be provided as part of size criteria for disabled claimants (or their partner) who require overnight care which is provided by a non-resident carer if they have a separate bedroom for this purpose. Unfortunately this does not apply if you already need a four bedroom house due to your family size, as four bedrooms is the maximum sized property you can claim housing benefit for. This will affect all claims from 1st April 2011 – if you believe you are entitled to the extra allowance you should contact your Housing Benefit Office as soon as possible. For more information see http://www.direct.gov.uk/en/Nl1/Newsroom/DG_192415.
Tax Credits – Changes to the way tax credits are assessed. For more information on tax credits see http://www.direct.gov.uk/en/MoneyTaxAndBenefits/TaxCreditsandChildBenefit/TaxCredits/index.htm
 Child and Working Tax Credit – Taper rates will be reduced when the claimant has ‘excess income’, meaning claimants who are not on maximum tax credits will see a reduction in their overall award. There is also a change to the income disregard when reconciling claims at the end of the year. This will be reduced from £25,000 to £10,000, meaning that if your income increases by more than £10,000 over the year you may find that at the end of the year you have been overpaid tax credits which you will then have to pay back. This may be a particular problem if you start work during the year after having been on benefits.
Child Tax Credit – Higher earners (households with earnings over £40,000 gross per year) will no longer receive Child Tax Credit. The baby element of Child Tax Credit will also be removed.
Working Tax Credit – Basic and 30 hour elements will be frozen for 3 years. This means the amount you receive will not increase in line with inflation. The percentage of your childcare costs covered by Working Tax Credit will also be reduced (from 80% to 70%). For those aged 60+, you will now be able to claim Working Tax Credit if you work 16 hours a week (as opposed to 30 hours previously)
Sure Start Maternity Grant – You will now only be able to receive this for your first child. For more information on the Sure Start Maternity Grant see this website.
Pension Credit - The maximum amount of Savings Credit will be frozen for 4 years. For more information on Pension Credit see http://www.direct.gov.uk/en/Pensionsandretirementplanning/PensionCredit/index.htm
State Retirement Pension – Will increase by highest of earnings, prices or 2.5%. For more information on your State Retirement Pension, see http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/index.htm
Child Benefit – Will be frozen for 3 years. For more information on Child Benefit, see this website.
Disability Living Allowance (DLA) – The high rate mobility component of DLA will be extended to people who have severe sight problems or who are blind. For more information see this website.
Benefit Uprating – Benefits have previously been worked out by looking at the inflation rate as measured by the Retail Prices Index (RPI). In future, they will be set by reference to the Consumer Prices Index (CPI. This is generally lower as it does not take into account housing costs.
Personal tax allowance – The basic Personal Allowance will increase by £1,000 to £7,475.
Equalisation of State Pension Age / Increase in Pension Credit Age – This started in 2010 and continues in 2011. The changes will mean women’s State Pension Age will increase to match men’s and the overall age for retirement will gradually increase for both men and women. For more information on the changes to State Pension Age see http://www.direct.gov.uk/en/Nl1/Newsroom/SpendingReview/DG_192159
October 2011
Lone Parents and Income Support (IS) – Lone parents will be required to be available for work (i.e. claiming Jobseeker’s Allowance rather than Income Support) from the time your child reaches the age of 5. This does not apply if your claim Income Support is based on other criteria than you being a single parent. For instance if you have a child who is entitled to the middle or higher rate care component of Disability Living Allowance or if you receive Carer’s Allowance you will not be expected to be available for work. For more information see this website.
 During 2012
Housing Benefit (HB) – Non-dependent deductions will continue to increase. See April 2011 section for more information.
Local Housing Allowance (LHA) – Single room rent extended to under 35’s – Currently, single people under 25 have their eligible rent for Housing Benefit purposes restricted to the LHA rate for a room in a shared house. This restriction will now be extended to all single people under 35. The only exception is those who are entitled to severe disability premiums. For more information on Local Housing Allowance see http://www.tameside.gov.uk/benefits/localallowance.
Discretionary Housing Payments – Budget to be increased by a further £40 million and targeted to those areas that will need it the most.
Tax Credits – Further changes to the way Tax Credits are calculated.
Child and Working Tax Credit – An income disregard of £2,500 for any fall in income will be introduced. This means that if your income drops by less than £2,500 gross in a year you will get no increase in tax credits. If your income drops by more than £2,500 then the first £2,500 will be disregarded. For instance if your income drops from £20,000 to £15,000 during the year, you will be reassessed as if you are on an income of £17,500 for that year. Back dating of new claims and change of circumstances will only be available for one month rather than three.
Child Tax Credit – The child element will increase by £110 above indexation. The upper earnings threshold of £40,000 will also be removed, meaning that rather than all families whose earnings are up to £40,000 per year being entitled to £545 for the year, as soon as the family’s income is high enough to have reduced the child element to nil; any further increase in income starts reducing the £545 family element. Many moderate to high earners will therefore lose entitlement to Child Tax Credit altogether.
Working Tax Credit – This will no longer be paid to couples with children who work 16 hours a week; instead they will have to either work 24 hours between them, with one of the couple working at least 16 hours a week; or one of the couple must work 24 hours or more a week. The 50+ route to claiming will also be removed.
Contributory Employment and Support Allowance (ESA) – Those on the work related component will have payments limited to one year. After this you can move onto income related payments if you are eligible. This limit can also be imposed retrospectively, so if you have been on Contributory ESA for 12 months by April 2012 your payments will be stopped immediately and you will have to apply for other benefits.
Disability Living Allowance (DLA) – People in care homes will now lose the mobility component of their DLA as well as the care component.
Equalisation of State Pension Age / Increase in Pension Credit Age – This will continue.
 During 2013
Housing Benefit (HB) – Non-dependent deductions will continue to increase. See April 2011 section for more information.
Social Housing rents restricted – Proposal that Housing Benefit restricted for those working age social housing tenants who are occupying a larger property than is deemed necessary.
Local Housing Allowance (LHA) - Rates will be uprated annually on the basis of the Consumer Prices Index, rather than monthly and on the basis of local rents as they are at present.
Council Tax Benefit – Amount available overall from the government for Council Tax Benefit will be reduced by 10% and localised, so Local Authorities can tailor the scheme to suit the own priorities in their area.
Child Benefit – Child Benefit will not be paid to families which include a higher rate taxpayer (currently earning £43,875 a year gross). However, a couple who both earn under £43,875 will keep Child Benefit even if their joint earnings are well over £43,875.
Tax Credits – Further reduction in the income disregard used to work out claims at year end from £10,000 to £5,000. This means if your income increases by more than £5,000 during the year you may find you have received Tax Credit overpayments which will have to be repaid at the end of the year. This will particularly affect those who have started work after a long period on benefits.
Disability Living Allowance (DLA) – Disability Living Allowance will be replaced by a new benefit called the Personal Independence Payment (PIP). PIP will be introduced for all new claimants and all existing DLA claimants who are of working age will be reassessed, and potentially moved to Jobseeker’s Allowance if they are not found to be eligible for PIP.
Benefits cap – Proposal that benefits are capped so no out of work family can receive more than around £500 per week in benefits (for single adults the maximum is likely to be around £350 per week) Families receiving Working Tax Credit, and people getting War Widow’s Pensions or Disability Living Allowance will be exempt. This cap includes Housing Benefit and therefore is most likely to affect those who live in areas of high rent or supported housing, or those who have large families.
Universal Credit – This proposed new benefit is to replace all means tested benefits, including Housing Benefit, Income Support, Income-Related Jobseekers Allowance, Income-Based Employment and Support Allowance, and Tax Credits. If parliament approves the plans then Universal Credit could start to be introduced for all new claims from Autumn 2013. Existing claimants of all affected benefits would then be gradually moved over between 2013 and 2017. For more information about Universal Credit see http://www.direct.gov.uk/en/Nl1/Newsroom/DG_191344
Equalisation of State Pension Age / Increase in Pension Credit Age – Continues.
During 2016
Equalisation of pension age - The equalisation of male and female pension ages will speed up so that they will be both be 65 by November 2018, and then both increase to 66 by 2020.
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