Kay Ingram: Those who have savings may see their entitlement to universal credit reduced
Kay Ingram is director of public policy at national monetary planning group LEBC.
An increase in joblessness to 7.5 percent of the working population by the second half of next year is anticipated by the Office for Budget Plan Duty.
That indicates many individuals may be required to look for universal credit for the first time.
Those who have cost savings might see their privilege to the benefit minimized; cost savings under ₤ 6,000 are overlooked, but in between this border and ₤ 16,000, each ₤ 250 of savings minimizes the credit by ₤ 4.35 monthly.
Nevertheless, those with savings may still be eligible to claim, and there are some crucial actions you can require to safeguard your funds.
1. Cover your tax bill independently
Ring fence any cash owed for your 2018-19 tax bill. Tax due through self-assessment, used by the self-employed and those with additional tax to pay, is normally paid in 2 instalments in July and January of the following tax year.
This year taxpayers could defer making the July payment till January 31. Cash reserved for tax is not counted as savings for the universal credit means test, so will not minimize entitlement to advantages.
While it would be ideal to hold cash due for tax in a separate account, it is not strictly needed so long as the self- evaluation return has been filed and the quantity owing agreed with HMRC.
Filing the income tax return by early December implies an individual can go into a ‘time to pay’ agreement if they require to, allowing them to delay payment beyond 31 January and spread out tax in budget-friendly instalments.
Doing this avoids the usual flat rate penalty of ₤ 100 however it will sustain interest at 2.6 per cent.
2. Don’t draw on your pension pots
This is not counted for the universal credit means test, unless the claimant is over age 66, but if cash is withdrawn it will count towards the means test.
The mistakes of tapping your pension prematurely are discussed here.
Pushed for money: Lots of people might be required to look for universal credit for the very first time after losing their jobs due to the Covid-19 crisis
3. Ring fence the cash in your organization
The self-employed need to ensure that any cash belonging to their company is ring fenced, and preferably kept in a separate account, or it too will be counted towards the means test for universal credit.
4. Avoid dropping your lifetime Isa
Younger individuals conserving for a house purchase deposit through a lifetime Isa will see their cost savings count towards the methods test for universal credit.
If these are drawn out, they will still count towards it unless they are currently invested, however you will lose the 25 per cent perk added to the lifetime Isa by the Government on the quantity withdrawn, so if possible, other cost savings must be invested first.
How does universal credit work? Many individuals are claiming universal credit for the very first time after losing their job in the pandemic. We explain the guidelines here, and This is Cash writer Steve Webb responds to a reader concern here.
5. Get an Aid to Save account
Universal credit plaintiffs are eligible to start an Aid to Save account, which can be kept for up to four years after their universal credit claim ceases.
So, those able to return into work might have the ability to restore their cost savings and the Assistance to Save scheme consists of a 50 per cent Federal government aid.
Qualified complaintants with family earnings of ₤ 604.56 per month or more might open an account. Maximum savings are ₤ 50 monthly over four years, with a benefit of 50 per cent of the highest balance paid after year two and year four.
Access to these cost savings is allowed without losing the reward.
6. Seek aid with childcare expenses
Moms and dads who declare universal credit can continue to receive child care vouchers however are disqualified for a tax-free child care account– but they can get help with as much as 85 per cent of child care costs as a universal credit complaintant.