Benefits shake-up: What is Universal Credit?

The changes represent the biggest shake-up of the welfare system for years. Credit: PA

Universal Credit will leave millions of working families worse off, according to the Institute for Fiscal Studies.

The single payment is being rolled out across the country and will replace six current benefits including Jobseeker’s Allowance and Employment and Support Allowance.

The government has insisted the move "will make work pay".

The idea is to replace six separate means-tested benefits with just one. Here we look at how the changes will affect you.

What is Universal Credit?

Universal Credit is a new single payment for people who are looking for work or on a low income.

It is designed to help claimants and their families to become more independent and will simplify the benefits system by bringing together a range of working-age benefits into a single payment.

It is being rolled out across the country and will replace:

  • Income-based Jobseeker’s Allowance

  • Income-related Employment and Support Allowance

  • Income Support

  • Child Tax Credit

  • Working Tax Credit

  • Housing Benefit

You can check here whether it is currently being rolled out in your area.

How will it work?

Universal Credit will be paid once a month, rather than fortnightly or weekly, and will go directly into a bank account.

If both you and your partner each receive these benefits, then this will change to a single payment for the household.

In addition, if you receive help in paying your rent at present, this money goes directly to your landlord.

Under universal credit, you will receive the money as part of your benefit payment and you will then have to pay your landlord.

There is a waiting period of 7 days from submitting your claim before your Universal Credit will start.

There are no limits to the number of hours you can work a week if you get Universal Credit.

Your payment will reduce gradually as you earn more. You won’t lose all your benefits at once if you’re on a low income.

What you will receive:

The amount of Universal Credit you’ll get depends on your circumstances and your income.

It can include support:

  • For housing

  • For children and childcare

  • If you’re disabled or have a health condition

  • If you care for somebody with a disability

  • You must pay your rent directly to your landlord if you get Universal Credit to help you with housing.

How will Universal Credit be rolled out?

If you're already getting benefits or tax credits, you don't need to do anything.

If you are currently receiving benefits that are due to be replaced by Universal Credit, the Social Security Agency will be in touch, to guide and assist you through the steps you need to take.

Read more: Welfare benefit changes - How will it affect you?

The differences between Universal Credit and the current system

The main differences between Universal Credit and the current welfare system are:

  • Universal Credit will be available to people who are in work and on a low income, as well as to those who are out of work

  • Most people will apply online and manage their claim through an online account

  • Universal Credit will be responsive – as people on low incomes move in and out of work, they will get ongoing support, giving people more incentive to work for any period of time that is available

  • Most claimants on low incomes will still be paid Universal Credit when they first start a new job or increase their part-time hours

  • Claimants will receive just one monthly payment, paid into a bank account in the same way as a monthly salary

  • Support with housing costs will go direct to the claimant as part of their monthly payment