4 March 2021
Budget 3 March 2021
In his Budget on 3 March 2021, the Chancellor announced various measures in relation to tax credits and universal credit.
- The Job Retention Scheme (the ‘furlough’ scheme) is to be extended until the end of September 2021. This means the special tax credit rules for people whose working hours change temporarily due to coronavirus will also be extended until the end of September 2021, while the Job Retention Scheme remains in place. In response to the coronavirus pandemic, HMRC introduced new legislation to allow people whose working hours reduced or who were temporarily laid off (such that they would not meet the hours thresholds for working tax credit) due to coronavirus, to be treated as working the hours they were doing before the coronavirus pandemic. The legislation effectively allows temporary changes to working hours due to coronavirus, for both the employed and self-employed, to be ignored whilst the Job Retention Scheme remains in place. This applies to temporary changes to working hours as a result of the coronavirus even if the claimant is not receiving support linked to the Job Retention Scheme. Any permanent changes to working hours need to be reported to HMRC in the usual way.
- The temporarily uplift in the rate of the basic element for working tax credit for 2020-2021 has not been extended and previously announced annual rates will apply from 6 April 2021. Instead, the Chancellor announced a new, one-off payment of £500 for people who are claiming working tax credit. Claimants do not need to claim the payment or contact HMRC about it – HMRC will work out who is entitled to the payment and arrange for the payment to be made. HMRC say they expect all payments to be made by 23 April 2021.
- The corresponding temporary uplift for the rate of universal credit for 2020-2021 has been extended for 6 months. This means that universal credit awards will continue to benefit from the temporary £20 uplift in the rate of the standard allowance, on top of the previously announced planned annual uprating, until September 2021.
- The Minimum income floor (MIF) policy, which was due to be reintroduced from May, will remain suspended until the end of July 2021. The MIF will be reintroduced gradually from August with some discretion where DWP assess that the claimant’s earnings continue to be affected by coronavirus restrictions.
- The temporary higher threshold of £2,500 for surplus earnings will remain in place for a further 12 months. It is now expected to revert to the normal level of £300 no earlier than April 2022.
- Repayment of advances and deductions cap: The period over which universal credit advances (advance payment of the award) must be repaid is extended to be 24 months and the maximum rate at which deductions can be made from a universal credit award will reduced from 30% to 25% of the standard allowance. Both of these changes have been announced previously but they will now be introduced from April 2021, instead of October 2021.
The full Budget documents are available on the GOV.UK website.
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