News Article

Autumn Statement: Universal Credit taper rate cut to 63p

Published 16 December 2016 by

If you currently get Universal Credit, you could see a boost to your benefits from next April. This is because the ‘taper rate’ is set to fall from 65% to 63%. Chancellor Philip Hammond announced the move in last month’s Autumn Statement.

But what does this mean and how likely it is to affect your benefits? And, more importantly, will you actually end up with any more money in your pocket after the change? Let’s take you through what this could mean for you.

What is the taper rate?

The Universal Credit taper rate is the amount you lose when you start to earn over a certain amount. When you claim Universal Credit, you’ll have a work allowance. If you earn over this threshold in any given month, you’ll lose a percentage of your Universal Credit. This percentage is the taper rate.

The current taper rate for Universal Credit is 65%. This means that for every £1 you earn over your work allowance, you’ll lose 65p of your Universal Credit.

You can put this in real-world terms with an example. Let’s say your work allowance is £397 a month – this is the amount you’ll get if you’re responsible for a child and you don’t get help with housing costs in your Universal Credit. If you earn £500 a month after tax, this is £103 over your work allowance. This means you’ll lose almost £67 a month from your Universal Credit.

What will change?

From April 2017, the Universal Credit taper rate will fall to 63%. So instead of losing 65p for every £1 you earn over the threshold, you’ll lose 63p instead. The reason for this change is so that people on Universal Credit will consider taking on work. It’s also as part of Prime Minister Teresa May’s pledge to help out the ‘JAMs’ – those families who are ‘just about managing’.

If we look at the example again, you’d now lose just under £65 a month under the new rules. That means that you’d be nearly £25 better off over 12 months.

Will it affect you?

It’s always good when a tax change means more money in your pocket but experts think the reduced taper rate won’t make much difference to the poorest in society. Hannah Maundrell of Money.co.uk says the cut to the Universal Credit taper rate ‘won’t be a silver bullet that saves the day’.

One campaigner from the Child Poverty Action Group said ‘just-managing families have already taken a big hit from previously announced cuts’. From April, some families will see changes to what they can claim from child tax credits. This cut will mean you can only claim child tax credits for your first two children – you can’t claim for any extra children born after April 2017. If this change affects you, it’s likely to outweigh any benefit from the Universal Credit taper rate.

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