How could the benefit cap affect you?

With changes to the amount of welfare benefits that people can claim coming into effect in April 2016, Bromford money advisor, Ruth Burley shares her thoughts and expertise. With more than 13 years’ experience in giving money and debt advice, Ruth has helped countless people get to grips with their finances. In this, the first of her regular blogs, Ruth explains how the benefit cap reduction could affect you.

There is a limit to the amount of income that you can receive in benefits – this is called the benefit cap. At the moment, if you’re a couple or have children and live outside London – which all of our customers do - your benefits are capped at £500 per week, that’s £26,000 a year. From April 2016 this will reduce by £6,000 a year to £384.62 a week (£20,000 a year).

Single people currently receive a maximum of £350 per week in benefits (£18,200 a year) with this reducing by nearly £100 to £257.69 per week.

In my role as a money advisor I’ve learned that one of the most important things when dealing with finances is budgeting. Working what you have coming in and what needs to be paid out is crucial for everyone to manage money effectively, but especially so when you’re on a low income. That’s why it’s so important for everyone who receives benefits to understand if they will be affected by the benefit cap, and if so, how they will be affected.

Not all benefits are taken into account when working out if your income exceeds the cap but the ones that do are crucial to people who claim them. These include Housing Benefit, Jobseekers Allowance, Income Support and Employment and Support Allowance (except when you’re in the support group). With the new benefit cap reduction there’s a real possibility of more families with children being affected than before. This is because the amount of Child Tax Credit and Child Benefit you receive are also taken into account when working out whether your benefits will be capped.

Here’s the list of benefits included when seeing if your benefit income exceeds the benefit cap:

• Bereavement Allowance
• Carer’s Allowance
• Child Benefit
• Child Tax Credit
• Employment and Support Allowance (unless you get the support component)
• Guardian’s Allowance
• Housing Benefit
• Incapacity Benefit
• Income Support
• Jobseeker’s Allowance
• Maternity Allowance
• Severe Disablement Allowance
• Universal Credit
• Widowed Parent’s Allowance (or Widowed Mother’s Allowance or Widows Pension you started getting before 9 April 2001)

Avoiding the cap

You may not be aware of this, but you will not be affected by the benefit cap if anyone in your household qualifies for Working Tax Credit. Bearing this is mind, one piece of advice that I give to my customers who are able to, is to think about getting themselves into the workplace. By working 16 hours a week if you’re single and have children, or 24 hours a week as a couple with children you can avoid being affected by the benefit cap.

Did you know?

You will be exempt from the benefit cap if you’re claiming working tax credits and you are:

• Working 16 hours a week if you are single and have children.

• Working 24 hours a week and you are a couple with children. 

I work closely with our opportunities team who give advice on all things work related including updating your CV, building your confidence and interview hints and tips. It’s not just about working for someone else either – if you’ve ever fancied working for yourself the team can offer help with this too.

As well as working tax credit, you shouldn’t be affected by the benefit cap if you receive any of the following:

• Disability Living Allowance
• Personal Independence Payment
• Attendance Allowance
• Industrial Injuries Benefits (and equivalent payments as part of a war disablement pension or the Armed Forces Compensation Scheme)
• Employment and Support Allowance, if you get the support component
• War Widow’s or War Widower’s Pension
• War pensions
• Armed Forces Compensation Scheme
• Armed Forces Independence Payment

The benefit system can be quite confusing, especially with the amount of changes that are taking place, so it’s important to get the right advice. I’m one of a growing team of money advisors at Bromford who are here to help our customers understand and deal with any changes that could affect you and your family. Please get in touch with us if you need any help managing your money – in the meantime you can find loads of helpful information here. 

If you know the amounts of each benefit that you get, you can use this calculator to give you an estimate of how much your benefit might be capped.