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The 'Benefit Cap'

 

The Government introduced rules in 2013 which limit the overall amount of welfare benefits a ‘working age’ household can receive. It does not affect you if you (or you and your partner) are Pension Credit age or over – unless you are getting Universal Credit or Income Based JSA or Income Support or Income Related ESA - or under Pension Credit age and getting certain benefits.

The Benefit Cap limit is going to be lowered, which means that if you are already affected by the Benefit Cap, you are likely to lose more of your benefits or, if you have not already been affected, you may be when the new lower limit is introduced where you live.
 
At the moment the Benefit Cap mainly affects large families (4 or more children) though it could affect you if you have fewer children, if your rent is high or if you are temporarily receiving Housing Benefit (or Universal Credit) on two homes.

When the Cap is reduced further more people will be affected (families with 3 or more children and families with 2 children in areas with higher rents eg. London). 

The Government has announced that the change will be introduced gradually, area by area, from Autumn 2016 onwards, with the majority of people being affected from 7th November 2016.

Here’s some information on the Benefit Cap, firstly for people on Housing Benefit, then for those on Universal Credit.
 

Benefit Cap for people on Housing Benefit

Who won’t be affected by the Cap?

You are exempt from the Benefit Cap if:

  • You or your partner are Pension Credit Age
  • You or your partner have claimed and are entitled to claim, Working Tax Credit
  • You, your partner, or a child or young person for whom you get Child Benefit, gets Disability Living Allowance, Personal Independence Payment or Armed Forces Independent Payment.
  • You or your partner are in the ‘support group’ of Employment Support Allowance
  • You or your partner get Industrial Injuries Disablement Benefit.
  • You or your partner get a War Disablement Pension, Armed Forces Compensation Scheme payment, or a War Widows’/Widowers’ Pension.
  • You (or you and your partner) are out of work but had been in work for at least 50 out of the 52 weeks before – this “grace period” lasts 9 months.
  • The government has also announced that it plans to also exclude anyone who gets Carer’s Allowance or Guardian’s Allowance from the Benefit Cap.

How do you work out if the Cap applies to you?

If you are of working age and not getting one of the benefits / in one of the situations that would exclude you from the Benefit Cap then the DWP will add together most of the benefits you are entitled to (including Child Benefit) to see if the weekly amount is higher than:

  • £500 per week for single parents.
  • £500 per week for couples with or without children.
  • £350 per week for single people without children.

These Cap levels will be reduced further – the new lower level will be rolled out gradually in different areas starting on 7th November 2016.

  • The £500 cap will be reduced to £442.31 in Greater London or £384.62 per week everywhere else.
  • The £350 cap will be £296.35 in Greater London or £257.69 per week everywhere else.

When you add the benefits together do not include: Council Tax Support, Statutory Sick Pay, Statutory Maternity Pay, Discretionary Housing Payments and Housing Benefit paid on ‘specified accommodation’ (ie certain supported housing – ask us if you’re not sure if this applies to you).

If the total amount of the benefits you (and your partner) are entitled to comes to more than the maximum amount allowed your Housing Benefit payments will be reduced. If this would mean losing all your Housing Benefit, you still have to be given 50p a week. This means that you can still try for a Discretionary Housing Payment.

It is only your Housing Benefit that can be reduced due to the Cap – although 50p a week must be left in payment. But if you receive Universal Credit then the whole of your Universal Credit award can be reduced due to the cap.

Example:

Julie and Nick have five children and 15, 11, 8, 4, and 2. Nick is currently unable to work following a car accident that has left him with back and leg injuries. They pay £115.00 per week rent.

They claim the following benefits (rates from April 11th 2016):

Child Benefit                £  75.50 per week
Child Tax Credit          £277.79 per week
Income Related ESA     £143.85 per week
Housing Benefit            £115.00 per week

Total “welfare” £612.14 per week.

The Benefit Cap is £500.00 per week so anything they are entitled to over this is taken off their Housing Benefit.  £612.14 minus £500.00 = £112.14 means “excess” is taken off their Housing Benefit.
£115.00 minus £112.14 = £2.86 per week Housing Benefit. So they have to pay the rest of the rent out of their other income.

If Nick is so incapacitated that he should really be in the “support” group of ESA, he ought to contact the DWP. Then if he is awarded the support component they would be entitled to an extra £7.15 a week AND be excluded from the Benefit Cap- so they would keep all their Housing Benefit.

Likewise if Nick was awarded Personal Independence Payment daily living component.

Get more information about the cap on benefits by calling the Government’s Benefit Cap information line on 0845 605 7064. For the government’s Benefit Cap calculator go to this link: https://www.gov.uk/benefit-cap-calculator.
 

Benefit Cap for people on Universal Credit

Who won’t be affected by the Cap?

The Benefit Cap does not apply to you:

  • In any months in which you or your partner have earned over £430 net a month.
  • If you, your partner, or a child or young person for whom you get Child Benefit, gets Disability Living Allowance, Personal Independence Payment or Armed Forces Independent Payment.
  • You or your partner are regarded as “having a limited capacity for work-related activity”.
  • You or your partner get Industrial Injuries Disablement Benefit.
  • You or your partner get a War Disablement Pension, Armed Forces Compensation Scheme payment, or a War Widows’/Widowers’ Pension.
  • You (or you and your partner) are out of work but had been in work continuously for over 12 months before losing the job, having earned at least £430 net or more in each of these months – this “grace period” lasts 9 months.

The government has also announced that it plans to also exclude anyone who gets Carer’s Allowance or Guardian’s Allowance from the Benefit Cap.

 

How do you work out if the Cap applies?

If you are of working age and not getting one of the benefits / in one of the situations that would exclude you from the Benefit Cap then the DWP will add together most of the benefits you are entitled to (including Child Benefit) to see if the weekly amount is higher than:

  • £2,167 per month for single parents.
  • £2,167 per month for couples with or without children.
  • £1,517 per month for single people without children.

These Cap levels will be reduced further – the new lower level will be rolled out gradually in different areas starting in the Autumn 2016.

  • The £2,167 cap will be reduced to £1,916.67 in Greater London or £1,666.67 per month everywhere else.
  • The £1,517 cap will be £1,284.17 in Greater London or £1116.67 per month everywhere else.

When you add the benefits together do not include: Council Tax Support, Statutory Sick Pay, Statutory Maternity Pay, Discretionary Housing Payments and Housing Benefit paid on ‘specified accommodation’ (ie certain supported housing – ask us of you’re not sure if this applies to you).

If the total amount of the benefits you (and your partner) are entitled to comes to more than the maximum amount allowed in a monthly assessment period then your Universal Credit payments will be reduced for that month. If you are struggling to pay your rent because of the Cap then you might be able to get a Discretionary Housing Payment to help you. Contact us for advice.

Example:

Mahia and Para have 6 children aged 17, 14, 10, 7 and twins aged 3. They have had difficulty finding work, and their rent is £128.00 per week (which works out at £554.67 per month).

They are entitled to:

Child Benefit                £  386.53 per month
Universal Credit           £2488.99 per month

Total “welfare” £2875.52 per month.

As this is £708.52 over their Benefit Cap of £2167.00 per month their Universal Credit will be reduced to £1780.47, so they will need to pay for their rent, food, bills etc. out of their reduced Universal Credit and their Child Benefit.

For the government’s Benefit Cap calculator go to this link: https://www.gov.uk/benefit-cap-calculator.

© 2016 Housing Systems Ltd

 

Find out more - take a look at our benefit cap FAQs.