A considerable amount of support has been announced for people affected financially by coronavirus: an employee furlough scheme, Statutory Sick Pay (SSP), loans and relief for small businesses and aid for the self-employed.
But not everyone fits neatly into one of these categories. Maybe you’ve not been self-employed long enough to be eligible for a grant. Perhaps you are still working but your income has fallen and you can no longer manage. Maybe you are not entitled to SSP but are ill with coronavirus or something else.
If that sounds familiar, this is where Universal Credit may come in.
What is Universal Credit?
Universal Credit was introduced in 2013 to try and simplify an increasingly complex welfare system by merging six benefits into one payment. They are:
- Housing benefit
- Income support
- Child tax credit
- Working tax credit
- Income-based Jobseekers’ Allowance
- Income-related Employment and Support Allowance
Claimants now receive one payment once a month (twice a month in Scotland), out of which they must cover all living costs, including rent. Some people still receive old-style benefits, known as legacy benefits, but all new applicants receive Universal Credit.
Who is eligible?
You can apply if you are on a low income or unemployed, as long as you meet all the following criteria:
- You are 18 or over
- You and your partner do not have more than £16,000 savings between you
- You live in the UK
- Either you or your partner is under the state pension age (between 65 and 68, depending on when you were born. You may want to check your state pension age.)
However, if you are 16 or 17, you can claim if any of the following apply:
- You have limited capability for work
- You are caring for a severely disabled person, or are responsible for a child
- You are more than 29 weeks pregnant
- You have no parental support
If you are between 18 and 21 and still in education or training, you may be able to make a claim but the criteria are narrow. You must either have a disability, be responsible for a child, or be in further education and estranged from your parents. You may also be able to claim if you live with your partner and they are eligible for Universal Credit.
What if you are self-employed?
You can apply for Universal Credit whether you are employed or self-employed, assuming your income is low enough and you meet all other eligibility criteria.
As a self-employed person, however, you could be eligible for the coronavirus Self-employment Income Support Scheme. This taxable grant mirrors the employee furlough scheme, covering 80% of your income up to a limit of £2,500 per month before tax.
The Self-employment Income Support Scheme is based on average monthly profits over the last three years, and you must have filed a tax return for the 2018-2019 tax year. If you have not been self-employed for this long, then you should apply for Universal Credit instead.
The scheme is also still being set up, and payments are unlikely to be paid until June. So you may still need to apply for Universal Credit even if you are eligible for a grant – HMRC will contact you if you are.
Disabled or ill?
Universal Credit is for everyone on limited incomes, regardless of disabilities. However, there are other benefits available if you are disabled. Take a look at the government-backed Money Advice Service to find out which might be appropriate.
If you’re unable to work because you are ill with coronavirus, and are not eligible for Statutory Sick Pay, you may be able to apply for so-called ’new style’ Employment and Support Allowance.
You can apply if one of the following applies:
- You or your child have or are recovering from coronavirus
- You are self-isolating after coming into contact with someone who has the virus
- You are deemed at high risk of severe illness, and have been told to stay home for 12 weeks
The amount you receive through ESA may not be enough to live off, however, so you may need to apply for Universal Credit alongside it, to help with other living expenses, such as rent.
How to apply for Universal Credit
Universal Credit is a means-tested benefit. This means all your finances, including any income, assets and savings, will be taken into account when you apply. If you live with your partner, their finances will be taken into account, even if they are not applying or eligible.
Use a benefits calculator to check if you are eligible, and to assess what you may be entitled to. The Government suggests several benefit calculator tools.
You cannot claim Universal Credit without an online account. If your partner lives with you, they will also have to set up an account, regardless of whether or not they are applying; you will be given a code to link the accounts. You will need:
- Your email address (you cannot set up an account without one)
- Bank/building society account details
- Payslips and details of all other income, savings and investments
- Housing costs
- Childcare costs
You will also need proof of identity, such as a driving licence or passport. If you have any problems while setting up your account, or do not have access to a computer, then call the free Universal Credit helpline on 0800 328 5644. The helpline operates Monday to Friday, 8am and 6pm. Expect long waits, however: since 16 March, more than 1.8m claims have been made.
You make your claim through the account, and must make a claim within 28 days of setting it up. Normally, you would then be asked to attend a meeting at a Jobcentre Plus to assess your claim. However, this requirement has been waived during the current crisis.
How much will you receive?
It depends on individual circumstances: your earnings, your partner’s financial position, how many children you have, and whether you are eligible for any other benefits.
Universal Credit is capped, however, up to £20,000 a year outside of Greater London, and up to £23,000 in the capital. It can be topped up with other benefits if you are eligible.
The amount you receive is assessed every month. You can continue to work, but your payment will reduce the more you earn: for every £1 earnt, your payment reduces by 63p.
If you are self-employed, you must report your earnings every month.
Potential problems - and possible solutions
My award is too low
If you disagree with the amount you are awarded, you can request a mandatory reconsideration through your online account within one month of the date of the decision.
I have been awarded Universal Credit, but it does not cover all my rent
The housing element of Universal Credit covers rent and some service charges, but will rarely cover all your rent. It is determined by strict guidelines covering the type of accommodation you live in and who you live with, and worked out using the Local Housing Allowance, based on rental prices in your area: check your rate at the LHA Direct website.
You can, however, apply to your local authority for a discretionary housing payment to help bridge the gap between what you are awarded and your rent. Check with your local authority.
The housing element does not cover mortgage payments. You can still apply for, and be awarded, Universal Credit if you own your own home, but your mortgage payments will not be taken into account when your award is being calculated.
I cannot afford to wait five weeks
Universal Credit is paid in arrears, and applicants may have to wait up to five weeks to receive their first payment; the Department of Work and Pensions has also warned that because of coronavirus, it may take longer than usual to process applications.
You can apply for an advance on your first payment via your online account within three days of making your claim.
But it is important to remember this is an interest-free loan that will need to be paid back. Repayments are automatically deducted from your monthly Universal Credit payments over the course of the first 12 months. The most you will receive is the amount of your first estimated payment.
It is not enough for me to live on
Other financial support may be available, from either the government or your local authority. The government’s online information on Universal Credit includes a list of further help and is a good place to start.
The above is intended as general information and does not constitute advice in any way. You should take independent advice if you have any questions about your specific circumstances.