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.
From April 2013 a cap was gradually introduced on the total amount of benefit that working-age claimants can receive, with the intention that households on out of work benefits do not receive more in benefit than the average weekly wage, after tax and national insurance.
Initially the cap was administered by local authorities via housing benefit and was rolled out gradually to various local authorities between April and end September 2013.
Since October 2013 it has also 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 from 31 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)
Before the 7 November 2016, the cap was higher. Between 7 November 2016 and 12 December 2016 the new cap was phased in. The total level of entitlement to welfare benefits was limited to £500 a week for couple and lone parent households and £350 a week for single households. For Universal Credit these amounts were converted to monthly figures to match Universal Credit’s monthly assessment period. For couples and lone parent households the cap was £2167 and for single adults it was £1517 per month.
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 (or for assessment periods beginning before 1 April 2017, £430). 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 (or £430 for assessment periods beginning before 1 April 2017) 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.
- For more information about the changes from 7 November 2016 see ADM memo 27/16
- For more information about the changes to the earnings threshold from 1 April 2017 see ADM Memo 2/17.
- GOV.UK website
- DWP ADM guidance
- Universal Credit Regulations
- House of Commons Library briefing paper (Nov 2016)
Last reviewed/updated 21 May 2018