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27 Oct 2021

Autumn Budget 2021: major changes to Universal Credit

Benefits taper cut will see workers keep more of their money

Almost two million low-income households will be able to keep more of their benefits due to changes to Universal Credit announced by Chancellor Rish Sunak in today's Autumn Budget.

By 1 December this year, workers claiming Universal Credit will see less of their benefits cut, as the government reduces the 'taper' - the rate at which you lose benefits for every £1 of income you earn.

The government claims that this is equivalent to a £2.2bn tax cut for workers.

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What is Universal Credit?

Universal Credit is the government's benefit system, which is gradually being rolled out across the UK to replace six benefits with one overall payment.

Housing benefit, income-related employment and support allowance, income-based jobseeker's allowance, child tax credit, working tax credit and income support are all being replaced, and the roll-out is expected to be complete in 2024.

How much you'll get depends on your circumstances, but you can claim whether you're working or unemployed and you'll usually receive one payment each month.

How much Universal Credit can I claim?

The standard rate of Universal Credit for a single person is currently £257.33 per month if you're under the age of 25 and £324.84 if you're 25 and over. Couples under the age of 25 can get £403.93 per month and couples over 25 get £509.91.

There was a temporary £20 per week increase in Universal Credit between March 2020 and September 2021, which ended earlier this month.

Universal Credit can be increased if you qualify for 'additional elements'. You get an extra £237.08 per month if you have one child born after 6 April 2017, or £282.50 per month if you have one child born before 6 April 2017.

You can find out the Universal Credit amounts for additional elements in our guide to what is Universal Credit?.

What is the 'Universal Credit taper'?

If you're working, how much you earn could have an impact on the amount of Universal Credit you can claim.

For every £1 you earn, you lose 63p of your Universal Credit benefits. Some people qualify for the 'work allowance', which allows them to earn up to £515 per month before their benefits start reducing. These are single people and couples with responsibility for a child or who have limited capability for work.

Today, the Chancellor announced that he would reduce the taper amount by 8p, meaning that you're able to keep more of your benefits - they will reduce by 55p for every £1 you earn.

The Chancellor announced that he will increase the work allowance by £500 per year.

The changes will be introduced this year, no later than 1 December 2021. Ordinarily, changes to Universal Credit are introduced at the beginning of the new tax year on 6 April 2022.

Find out more: how to calculate Universal Credit

What does this mean for people claiming Universal Credit?

Someone earning the National Living Wage, which is increasing to £9.50 an hour on 1 April 2022, would earn £190 for doing 20 hours of work.

Under the old rules, they would see their Universal Credit reduced by £119.70. Under the announcement made by the Chancellor today, the benefit would be reduced by £104.50.

The government claims that this is a tax cut for 1.9 million low-income households is equivalent to £2.2bn.

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