Universal Credit isn’t working: proposals for reform Contents

Appendix 3: Glossary

Edited version of glossary written by Marsha Wood for Uncharted Territory: Universal Credit, Couples and Money.323

Administrative Earnings Threshold (AET): Claimants with very low earnings below a certain level, known as the administrative earnings threshold (AET), are expected to carry out intensive work related activity as part of their claimant commitment if relevant to their conditionality requirements. Only employed earnings can contribute to meeting the AET (this means that self-employed earnings will not count towards it).

Advance Payment: Claimants who are struggling to cope financially while they wait for their first Universal Credit payment can apply for an advance payment. The maximum awarded as an advance is the amount of their first estimated Universal Credit monthly payment. Advances are repayable and claimants start to pay back them back from their first Universal Credit payment. Currently advances must be repaid in full within 12 months (due to be extended to 24 months from October 2021).

Alternative Payment Arrangement (APA): Alternative Payment Arrangements (APAs) are for claimants on Universal Credit who are deemed to be struggling to manage a single monthly payment, with a risk of financial harm to the claimant and/or their family. The following APAs are available: paying housing costs of Universal Credit as a Managed Payment (MP) direct to the landlord, sometimes called ‘direct payments’; more frequent payments (typically, twice monthly but also potentially four times per month); and split payment of an award between the partners on a joint claim.

Applications/declarations: When an individual/household provides information on their personal circumstances to begin a Universal Credit claim. Not all will go on to receive a payment.

Benefit Cap: The benefit cap is a limit on the total amount of income from certain benefits a household can receive. It is set at a different level depending on whether claimants live inside or outside London. Some claimants who are in paid work may be exempt from the benefit cap if their earnings are high enough.

Bedroom Tax: Also known as ‘under-occupancy charge’ or ‘abolition of the spare room subsidy’, this is a reduction in housing benefit or the housing element of Universal Credit for people who live in council or social rented sector housing and are classed as having one or more spare bedrooms.

Benefit Run-On: A non-recoverable two-week Housing Benefit run-on was introduced in April 2018, and a two-week run-on for claimants moving on to Universal Credit from Income Support, income-based Jobseeker’s Allowance and income-related Employment and Support Allowance is to be introduced in July 2020.

Budgeting Advance: Claimants might be able to get a budgeting advance to help with items such as emergency household needs, work related costs or funeral costs. To be eligible for a budgeting advance, claimants must have been getting Universal Credit for six months or more unless they need the money to start or stay in work. They must have also been earning under certain amounts and must have paid off any previous budgeting advances.

Carer’s Allowance: Carer’s Allowance is a non-means-tested, non-contributory benefit for eligible working age carers not in receipt of other benefits. Recipients can combine caring with a small amount of paid work before eligibility is lost. Carer’s Allowance is deducted pound for pound from the Universal Credit award.

Carer Element of Universal Credit: People caring for a severely disabled adult or child for 35 hours per week or more, who are eligible for Universal Credit, may qualify for the carer element. Those in receipt of the carer element can combine caring with paid work, but any earnings are included in the taper (above the work allowance, if relevant). Eligible claimants can choose whether to receive Carer’s Allowance or the carer element of Universal Credit, but they cannot receive both at the same time.

Change of Circumstances Reporting Requirements: Some changes in circumstances must be reported each month, and failure to report might lead to Universal Credit being stopped or reduced. Changes include: finding or finishing a job, having a child, moving in with a partner, starting to care for a child or disabled person, moving to a new address, changes to bank details, rent going up or down, changes to health condition, becoming too ill to work or meet a work coach, changes to earnings (only for self-employed or those not paid through the PAYE system).

Child Amount/Element in Universal Credit: A ‘child amount’ may be included in a Universal Credit award for each dependent child or ‘qualifying young person’ for whom claimants are responsible. However, there is a two-child limit. A child amount is only paid for a third or subsequent child if they were born before 6th April 2017 unless there are exceptional circumstances. There are additional amounts for disabled children.

Childcare Element of Universal Credit: Claimants with dependent children receiving Universal Credit can reclaim up to 85 per cent of their childcare costs, up to certain maximum amounts per month if they are in paid employment or, in the case of couples, if both partners are in paid employment. To make the claim for childcare costs under Universal Credit, claimants have to pay their childcare costs upfront and then re-claim each month in arrears for the hours they have used in each assessment period.

Child Tax Credit (CTC): Child Tax Credit is a means-tested tax-free payment administered by HMRC. CTC is for low income people, whether working or not, who are responsible for children. CTC is being replaced by Universal Credit. CTC claimants can choose whether to have it paid weekly or four-weekly.

Claimant Commitment: The claimant commitment sets out what the claimant has agreed to do to prepare for and/or look for work, or to increase their earnings if they are already working. It is based on their personal (and joint, if claiming as a couple) circumstances and reviewed and updated on an ongoing basis. If claiming Universal Credit as a couple, both partners have their own commitment which they need to accept for the joint claim to be ‘eligible’. Universal Credit payments to the couple may be subject to sanctions if claimants do not meet their individual responsibilities.

Conditionality Earnings Threshold (CET): Claimants earning above a certain level will not be asked to carry out work-related activity as part of their claimant commitment. This is known as the conditionality earnings threshold (CET). The CET is calculated on an individual basis by multiplying the National Minimum Wage by the number of a claimant’s expected hours. The joint CET for a couple is a combination of the individual expected CET of each of the adults in the household (joint claimants, or including an ineligible partner of a claimant). In a couple, if one of the adults has earnings above the joint CET, both claimants are placed in the ‘working enough’ regime, regardless of whether they are both working or not.

Council Tax Support (CTS)/Council Tax Reduction (CTR): Council Tax Support, also known as Council Tax Reduction, is a scheme for reducing the council tax payable for people on low incomes and/or in certain categories. Eligibility criteria and entitlement rules vary from one local authority area to another.

Deductions: Deductions are monthly amounts mandatorily taken on an automated basis from a claimant’s Universal Credit award to repay outstanding loans and debts owed to the government and/or third parties—including local authorities, landlords and utility providers—for a range of debts including advances, benefit overpayments, emergency loans, rent arrears, council tax arrears, utility arrears and court fines. They reduce at source a claimant’s Universal Credit payment and can be taken without the claimant’s consent. In couples claiming Universal Credit jointly, the loans and debts of both the partners are aggregated to apply these deductions. Last resort deductions are taken in order to help prevent claimants being evicted or disconnected from their fuel supply.

Department for Work and Pensions (DWP): National government department responsible for the administration of social security benefits. The devolved governments have responsibility for administering some benefits and for some elements of UK-wide benefits.

Disability Living Allowance (DLA): Disability living allowance (DLA) provides non means—tested help towards the extra costs of bringing up a disabled child. It is paid in addition to other social security benefits and can give access to other types of help. DLA has two parts: a mobility component—for children with walking difficulties, paid at either a lower rate or a higher rate; and a care component—for children needing extra personal care, supervision or watching over because of a disability—which is paid at three different rates. Children can be eligible for either the care component or the mobility component on their own, or both components at the same time. DLA is normally for children under the age of 16.

Employment and Support Allowance (ESA): ESA is for people under State Pension Age who have a disability or health condition that affects how much they can work. You can be in or out of work and claim ESA but there are conditions about working whilst on ESA. Most new claims are for ‘new style’ (contributory) ESA for people who have worked and paid enough National Insurance contributions in the last two to three years. The other type of ESA is income-related ESA, which is means tested and for people who do not have enough National Insurance contributions to claim new style ESA. Income-related ESA is being replaced by Universal Credit.

Flexible Support Fund (FSF): This is a discretionary fund introduced in 2011 to give Jobcentre Plus advisers more flexibility to support Universal Credit claimants back to work. The FSF can be used to pay for upfront childcare costs until a claimant receives their first wage. FSF payments are not loans and do not need to be repaid.

Help to Claim: The ‘Help to Claim’ service started in April 2019 and is delivered independently of the DWP by Citizens Advice and Citizens Advice Scotland to provide free, confidential assistance to applicants making a claim for Universal Credit. The service can be accessed any time until the first full correct payment of Universal Credit is in place.

Housing Benefit (HB): Housing benefit is being replaced by Universal Credit for those of working age (see ‘Housing costs element of Universal Credit’, below). Housing benefit helps people to pay their rent. To be eligible for housing benefit, claimants need to be on a low income—for example, being on income-related ESA, income-based JSA, income support or the guarantee credit element of pension credit—but those with low earnings may also qualify. Housing benefit does not always cover all claimants’ rent—for example, if the level of income is too high for all the rent to be met, or if the benefit cap has been applied. For private renters, rent is only met up to the level of the Local Housing Allowance.

Housing Costs Element of Universal Credit: A housing costs amount may be included in a claimant’s Universal Credit award if they pay rent to a landlord. The amount people get is normally based on the number of rooms people are deemed to need depending on the size of the household. Owner-occupiers can now only get support for mortgage interest as a loan, and only if they have been out of work and receiving Universal Credit continuously for nine months.

Income Support (IS): A means-tested benefit that supports claimants to cover their costs if they are on a low income. For people to be eligible, they need to have no income or be on a low income, and have no more than £16,000 in savings. They are not entitled to IS if they work for 16 hours or more a week or if their partner works for 24 hours or more a week (although there are some exceptions). They, or their partner, must not be claiming income-based JSA or income-related ESA. Claimants can only still apply for Income Support if they either receive the severe disability premium or are entitled to it, or received or were entitled to it in the last month and are still eligible for it.

Jobseeker’s Allowance (JSA): Jobseeker’s allowance is for people who are unemployed or working less than 16 hours per week and who are seeking work. There are two types of JSA. Income based JSA is a means-tested benefit and is being replaced by Universal Credit. ‘New style’ JSA is a contribution-based benefit and means that people can claim it if they have paid and/or been credited with enough National Insurance (NI) contributions in the two full tax years before the year they’re claiming in. New Style JSA can be claimed on its own or at the same time as Universal Credit.

Joint Claim: Couples who live together in the same household (same sex or opposite sex) cannot claim Universal Credit as individuals, but must claim jointly. This is called a joint claim. When one person, rather than a couple, is claiming Universal Credit or other benefits this may be described as a Single Claim.

Joint Claimant: Someone who is part of a joint Universal Creditor legacy benefit or tax credits claim. When someone is claiming Universal Credit or other benefits on their own, they may be described as a Single Claimant or a Sole Claimant.

Lead Carer: Couples on Universal Credit with dependent children are required to nominate a ‘lead carer’ with main responsibility for looking after the children. This person is also sometimes known as a ‘main carer’.

Legacy System (of Benefits and Tax Credits): This relates to the means-tested benefits and tax credits being replaced by Universal Credit. There are six legacy benefits and tax credits: Income-based Jobseekers Allowance, Income-related Employment and Support Allowance, Income Support, Housing Benefit, Child Tax Credit, Working Tax Credit.

Limited Capability for Work in Universal Credit: Universal Credit claimants may be asked to attend a Work Capability Assessment (WCA) to assess whether their health condition or disability affects their ability to work. A decision-maker will use the outcome of the WCA to decide whether the claimant is fit for work; has a limited capability for work which means that they will not have to look for work, but will need to take steps to prepare for work; or has limited capability for work and work-related activity–meaning that the claimant will not be asked to look for or prepare for work.

Local Housing Allowance (LHA): LHA is the rate of local rent used to calculate housing benefit for tenants renting from private landlords (see Housing benefit, above).

Lone Parent: Person with dependent children living without a partner. They may have a partner who does not live with them.

Managed Migration: Managed migration is the process in which the Department for Work and Pensions will move claimants from the legacy benefits to Universal Credit. The current date by which all claimants should be moved from the legacy benefit to Universal Credit is September 2024. Managed migration is currently only being tested in Harrogate in a pilot known as ‘Move to Universal Credit’. (Suspended due to COVID-19.)If a legacy benefit claimant has a relevant change of circumstances, they must make a claim for Universal Credit. This is known as ‘natural migration’ on to Universal Credit. This term also covers the way in which some benefits have now been closed to new claims, with anyone wishing to claim benefit for that situation having to claim Universal Credit. People can also choose to move to Universal Credit if they want to.

Monthly Assessment/Payment: Universal Credit is means-tested and calculated separately each month. Known as the ‘assessment period’, the fixed monthly assessment window begins on the first day a sole or joint claimant becomes eligible for Universal Credit and ends a calendar month later. Payment is made seven days later on the same date each month, but the day of the week it is paid varies from one month to the next and from one claimant to the next, depending on the date the claim becomes ‘eligible’.

Minimum Income Floor: When claimants are self-employed and they claim Universal Credit, they are treated as if they are earning a certain amount. This amount is called the ‘minimum income floor’. If the minimum income floor applies and claimants earn below this level in any month, they are treated as earning the minimum income floor. (Suspended due to COVID-19.)

Online Journal/Online Universal Credit Account: Universal Credits managed through an online account and journal. The journal is used to keep a record of the actions claimants have taken to prepare for or look for work; for claimants to send messages to their work coach and read messages sent to them; report a change of circumstances; record childcare costs; provide details about a health condition or disability. The account can be used to see how much Universal Credit payments are, to check what has been agreed in the claimant commitment and to report changes of circumstances. Actions claimants need to take whilst on Universal Credit are set out in a ‘to do’ list on their online account.

Overpayments: If claimants are overpaid their benefits or tax credits, the repayments can be taken from them through deductions from their current benefit payments; through taking it out of benefits owed to them such as arrears; by taking amounts directly out of wages; and via a court order for debt recovery.

Personal Independence Payment (PIP): PIP is a benefit for adults who have a physical or mental disability and need help taking part in everyday life or find it difficult to get around. It replaced disability living allowance for people aged 16 and over. PIP is tax–free and not means-tested or contributions-based. PIP has two parts: a daily living component—for help taking part in everyday life; and a mobility component—for help getting around. Each component is paid at a standard rate or an enhanced rate.

Real Time Information (RTI) System: For claimants in employment and on PAYE, Universal Credit payments are adjusted on a monthly basis as wages rise or fall using a new real time information system(RTI) introduced in 2013 through which employers report payroll information to HMRC (although self-employed people still need to report their income manually).

Rent Arrears: Owing money to a landlord (social or private) due to missing, or being late with, rent payments in whole or in part.

Sanction: A Universal Credit sanction is when claimants have a cut in their benefit after being judged as failing to meet their ‘claimant commitment’ without a good reason.

Separate payments: A proposal to pay part of Universal Credit to each partner in a couple either by default or by choice as of right.

Severe Disability Premium: A Severe Disability Premium is an extra amount that is included in some means-tested benefits to help with the costs of disability. People who are entitled to a Severe Disability Premium cannot claim Universal Credit and can still make new claims for the benefits being replaced by Universal Credit.

Single Payment/Single Award: All the elements of Universal Credit paid together at one time, usually into one bank account for couples.

Split Payment: This is when a benefit award is split between the partners to a joint claim. Split payments are one of the Alternative Payment Arrangements (APAs) for claimants on Universal Credit who are deemed to be struggling to manage their single monthly payment, with a risk of financial harm to the claimant and/or their family (see above). They are awarded on an exceptional, discretionary and usually temporary basis.

Standard Allowance: Universal Credit is made up of a standard monthly allowance, with some people being able to claim additional amounts. Standard monthly amounts vary depending on whether you are single or in a couple and on whether you are under or over 25.

Surplus Earnings Rule: If earnings within the assessment period reduce the Universal Credit award to zero, any ‘surplus earnings’ in that month are carried over and counted as earnings in the following month. Claimants are only currently treated as having surplus earnings if earnings are at least £2,500 per month above the income level at which the Universal Credit award would drop to zero.

Taper Rate: The taper rate sets the amount of benefit a claimant loses for each pound they earn. The earnings taper rate for Universal Credits currently 63 per cent. This means that for every pound claimants earn (over their work allowance, if eligible for one) their Universal Credit will be reduced by 63 pence. This taper rate applies to net income (after any income tax and NI contributions). Council tax support/reduction may be reduced with rising earnings in a separate process.

Transitional Protection: Transitional Protection tops up a claimant’s Universal Credit award so that they are not worse off when they move on to Universal Credit through managed migration if they otherwise would be. It is usually eroded over time through inflation.

Two-Child Limit: Claimants cannot claim the child element of Universal Credit in respect of a third or subsequent child born after April 2017, unless they are included in a limited range of exceptions.

Universal Support: Universal Support was delivered by local authorities, funded by grants from the Department for Work and Pensions (DWP). It was a scheme to help people make a Universal Credit claim and manage ongoing payments. It was withdrawn and replaced with Help to Claim in April 2019. When Universal Credit was first proposed there were ideas about an alternative Universal Support system that were not pursued.

Welfare Cap: limits the total amount that Government can spend on certain benefits, including tax credits and housing benefit.

Work Allowance: Working claimants are eligible for a work allowance if they (and/or their partner) either have responsibility for a child or limited capability for work. This is a certain amount that they are permitted to earn per month before their benefits start to be reduced. Rates are different for those with and without housing costs included in their Universal Credit award.

Work Coach: Work coaches are front-line DWP staff based in Jobcentres. Their main role is to support claimants into work by challenging, motivating, providing personalised advice and using knowledge of local labour markets. This involves conducting work focused interviews and agreeing tailored ‘claimant commitments’.

Work Conditionality: Under the claimant commitment, people may be required to fulfil work conditionality requirements. These vary according to circumstances and there is some discretion in how they are applied.

Working Tax Credit (WTC): WTC is being replaced by Universal Credit. WTC is a means-tested tax-free payment administered by HMRC. WTC is for those who are either individuals in low-paid work or in households on low incomes with an earner, whether or not they are responsible for children. Working Tax Credit claimants can choose whether to have the benefit paid weekly or four-weekly.

323 Rita Griffiths, Marsha Wood, Fran Bennett and Jane Millar, Uncharted Territory: Universal Credit, Couples and Money (June 2020): https://www.bath.ac.uk/publications/uncharted-territory-universal-credit-couples-and-money/attachments/Uncharted-Territory-Universal-Credit.pdf [accessed 21 July 2020]

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