Universal credit: Benefit cap
With the introduction of Universal Credit comes the Benefit Cap, as part of the Government’s Welfare Reform agenda. The benefit cap basically means that there is an upper limit on the amount of benefit that working age claimants who are out of work can receive.
The cap was introduced on the total amount of benefit that working age claimants can receive, with the intention that households on out of work benefits should not receive more in benefit than the average weekly wage, after tax and national insurance.
Since October 2013 the cap has applied to all new claims to Universal Credit including those migrated from existing benefits. There is a Benefits Cap calculator available on the GOV.UK website
The benefit cap was introduced in Northern Ireland in May 2016.
The current cap is:
Outside of Greater London Borough -
- Couple (with or without children) or a single parent - £384.62 a week (£1666.67 per UC assessment period)
- Single person without children - £257.69 a week (£1116.67 per UC assessment period)
If you live in a Greater London Borough
- Couple (with or without children) or a single parent - £442.21 a week (£1916.67 per UC assessment period)
- Single person without children - £296.35 a week (£1284.17 per UC assessment period)
The benefits currently taken into account in calculating the cap are:
- Bereavement Allowance;
- Child Benefit;
- Child Tax Credit;
- Employment and Support Allowance (unless you get the support component);
- Housing Benefit;
- Incapacity Benefit;
- Income Support;
- Jobseeker’s Allowance;
- Maternity Allowance;
- Severe Disablement Allowance;
- Universal Credit; and
- Widowed Parent’s Allowance (including widowed mother’s allowance and widow’s pension).
The cap does not apply if anyone in the household is receiving WTC, Guardian's Allowance or certain disability benefits. See the GOV.UK website for a full list of these benefits.
The benefit cap is relevant to the final stage of calculating entitlement to UC. Firstly, the amount of excess must be calculated. This is the amount that the UC entitlement (plus any of the other benefits listed above) exceeds the benefit cap minus any amount included in the award for childcare costs. This ensures that childcare costs are protected from the cap. No reduction is applied if the childcare costs exceed the excess amount.
There are some other exceptions to the cap. The cap does not apply where:
- Net earned income (combined income if part of a couple) in a monthly assessment period is above the relevant threshold (roughly the equivalent net earnings from 16 hours per week paid at the national living wage rate).
- The claimant is within a nine-month grace period. A grace period occurs where the claimants earnings (or their combined earnings if they have a partner) from work are less than the relevant threshold but immediately before this applies their earnings were at least the relevant threshold for the preceding 12 months. A grace period also occurs where before the current period of entitlement to UC the claimant stopped work and immediately before stopping work their earnings were at or above the relevant threshold every month for the preceding 12 months.
Prior to 1 April 2017, the relevant threshold was a fixed amount of £430. For any assessment period beginning on or after 1 April 2017, instead of having a fixed level of net income that exempts a claimant from the cap it has been changed to be based on the monthly amount a person earns by working 16 hours a week at the national living wage – which is £542.88 a month currently.
The earnings threshold is set by reference to the living wage rate which applies to those aged 25 or over even if the claimant is under 25.
The cap was introduced in Northern Ireland from 31 May 2016.
In Northern Ireland, ‘Welfare Supplementary Payments' can be paid to any households with children who have their Housing Benefit reduced due to the benefit cap. The payments should match the amount by which their Housing Benefit is reduced, effectively meaning they are no worse off. These payments will remain available until 31st March 2020.
Fore more information, see the Chapter E5 ADM guidance on GOV.UK.
Last reviewed/updated 7 January 2019