If you receive benefits you could soon find that how you qualify and the amount of money you receive changes significantly. Here?s what you need to know about the coalition government?s welfare reforms.
The government’s plans to cut welfare payments have been in and out of the headlines for months – but what exactly is due to change and how will your finances be affected?
What is being proposed?
There are several changes to the welfare system currently being debated in the House of Commons and the House of Lords.
The final outcome is likely to have a dramatic impact on the finances of thousands of people across the UK.
If you currently receive benefits, be it ESA, JSA, child tax credits, child benefit or housing benefit, you’re likely to be one of them.
Here’s what’s changing:
The Benefits Cap
The most high profile change being put forward by the coalition government is a cap on the amount of state benefits any household can receive.
They intend to limit benefit payments to £26,000 a year per household – this equates to an income of around £500 a week, the equivalent of a £36,000 salary.
This benefit cap would encompass all regular income, including the following;
- Jobseeker’s allowance
- Income support
- Employment support allowance
- Housing benefit
- Child tax credits
- Industrial injuries disablement benefit
There are, however, certain exemptions from the proposed benefits cap, for instance working tax credit and disability living allowance or personal independence payments. All war widows and widowers will be excempt from the benefit cap.
It now looks likely that child benefit will be excluded from these income calculations too.
Providing the benefit cap gets the go-ahead it will apply to all households in England, Scotland and Wales from April 2013.
A debate to decide whether Northern Ireland will also follow suit is likely to take place in the very near future too.
Changes to Child Benefit
From January, 2013 higher rate tax payers earning over £42,475 a year will no longer be able to claim child benefit.
This proposal was announced in the 2010 spending review shortly after the coalition government was formed and could potentially affect thousands of households across the UK.
Read our article: The Child Benefit Cuts Your Questions Answered to find out exactly what’s changing and how you’ll be affected.
However, do bear in mind that child benefit changes are not yet set in stone so they may yet be revised. The main issue attracting criticism at the moment is that the plans hit single income families much harder than those where both parents work.
A limit on ESA benefit
It’s likely a 12 month limit will be introduced on employment support allowance payments (ESA) where the recipient is judged as being able to work.
ESA recipients, who suffer from a serious illness, including cancer, will be means-tested after receiving ESA for 12 months.
The earliest the changes to ESA could become law is April, 2012.
The end of Disability Living Allowance?
From April 2013 Disability Living Allowance (DLA) will be replaced with a Personal Independence Payment (PIP).
Once this change takes effect you’ll have to complete a set of medical tests before you can claim and be subject to regular assessments to check you still need the payment.
Assessments will take place between 2013 and 2016, and anyone aged between 16 and 64 that receives DLA will be invited to an assessment to check their eligibility.
At present there are no plans to cancel DLA for anyone aged under 16 or over 65.
Are the changes set in stone?
All the welfare reforms detailed above are still going through the process of being made into UK law and will need to be approved by the House of Lords.
As a result you may find that the final changes to the welfare system that finally take effect are slightly different to those listed above.
Are there any positive changes?
Although many of the changes to the welfare state are aimed at cutting the government’s welfare bill there are some who may benefit from the changes.
For instance, from April, 2012 the annual tax free allowance – the amount of money you can earn before you pay income tax – will climb from £7,475 to £8,105 for those under the age of 65. So if you earn less than £42,475 you should be better off.
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