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Benefits are changing

A guide for families with disabled children

April 2017 sees the introduction of a number of changes to the benefits and tax credits system. This guide explains what these changes are, and how they may impact on families with disabled children.

This guide covers England, Wales, Scotland and Northern Ireland.

If you are worried about what any of the changes mean for you and your family, please call Contact a Family’s freephone helpline on 0808 808 3555, email helpline@cafamily.org.uk

Contents

Limiting tax credit and Universal Credit payments to two children Page 2Scrapping the family element of Child Tax Credit and higher Universal Credit payments Page 4Cutting Employment and Support Allowance (ESA) and Universal Credit payments for some disabled adults Page 5 Employment and Support Allowance permitted work limit removed Page 7Changes to bereavement benefits Page 7Tax free childcare Page 9Scrapping help with housing costs for 18-21 year olds Page 11New youth obligation for 18-21 year olds Page 12Other Universal Credit changes Page 13 Bedroom tax changes Page 13

28 April 2017

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Limiting tax credit and Universal Credit payments to two children

Usually, the amount of tax credits or Universal Credit that you get goes up as you have more children. This is because you receive an extra payment known as a child element for each dependent child in your household. So for example, a family with four children would receive four child elements in their calculation for tax credits or Universal Credit.

However, new rules restrict payments of the child element to the first two children in a family. This will only affect you if:

you already have two or more dependent children, and you have a new baby born on or after 6th April 2017, or a child born on or after 6th April joins your household.

For tax credits, the new rules will be applied:

if you are getting tax credits and you have a third or subsequent child born on or after 6th April 2017. You will not receive a child element for that child.

if you are a family with three or more children and you make a new claim for tax credits. You will not receive a child element for a third or subsequent child if they were born on or after 6th April 2017.

For Universal Credit, the new rules will be applied:

if you are getting Universal Credit and you have a third or subsequent child who is born on or after 6th April 2017. You will not receive a child element for that child.

If you are a family with three or more children and you try to make a new claim for Universal Credit, you will not be allowed to claim Universal Credit and must claim tax credits instead. This will apply until October 2018. After October 2018 larger families will be able to make new claims for Universal Credit but this will not include a child element for third or subsequent children, regardless of when they were born.

Corresponding changes will be made to the Housing Benefit rules. This means that if you are affected by the new rules, which limit tax credits and Universal Credit to the first two children, you won’t be able to make up the shortfall by getting extra Housing Benefit payments.

My third child was born before 6th April 2017. Will I be affected by this rule?

No. Not immediately. These rules only apply to children who are born on or after 6th April 2017. If your child was born before that date, you can still receive a child element for them, even if they are your third or subsequent child.

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However, this will change with new Universal Credit claims made after October 2018, where you can only receive payments for your first two children - no matter when your third or subsequent children were born.

How much will families lose out?

The child element is worth £2,780 a year for each child.

So for example, if you already have two children and then have two more children born in 2018 and 2019 you would lose out on £5,560.

Are families with a disabled child exempt?

No. These rules apply to families with disabled children in the same way as everyone else. However, remember that it is only the child element that is stopped.

If you have a third child born on or after 6 April 2017 who is awarded Disability Living Allowance (DLA) you will be entitled to an extra disabled child element for them.

To get the disabled child element, make sure you tell the tax credits or Universal Credit office about any of your dependent children who get DLA or Personal Independence Payment (PIP) – even if you don’t get a child element for them.

Childcare costs in tax credits and Universal CreditAny childcare costs that you have for a third or subsequent child CAN still be met by tax credits or Universal Credit under the usual rules. This applies regardless of whether that child is disabled or not. Make sure you contact the relevant office.

What happens if my tax credits payments are being limited to my two eldest children but I stop claiming for one of my older children?

This would allow you to start receiving payments for your third child even though they were born on or after 6 April 2017.

For example, Mrs Hay has four children born in 2002, 2004, 2018 and 2019.

Initially she only gets a child element for the two older children.

However, her eldest child leaves her household to go and live with his father, who is separated from Mrs Hay. This means she would start to receive a child element for the child born in 2018, as he will start to be treated as the second child in her claim.

The same principle will apply where you stop being responsible for an older child for any other reason. For example, they leave education, turn 20 or start claiming benefits as a young adult.

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Are any children exempt?

Yes. There are very limited circumstances where you can still get a child element for a third or subsequent child born on or after 6 April 2017. This includes where that child has:

been adopted come to live with you and you are a family member or friend of the child. This will

include children living with you as a result of a residence order, special guardianship, kinship care order or in circumstances where the child would otherwise have been taken into care

been born as a result of a multiple birth children born as a result of rape, or a relationship where their mother was subject to

abuse which included coercion and control.

What about Child Benefit payments for a third or subsequent child?

Child Benefit is not affected by these rules.

Scrapping the family element of Child Tax Credit and higher Universal Credit payments for the eldest child

Child Tax CreditUnder existing tax credit rules, a family with at least one dependent child receives an extra child tax payment known as the family element.

This is worth £545 per year. However, the family element will be scrapped from tax credit awards if all of the children included in your claim were born on or after 6 April 2017.

Universal CreditUnder Universal Credit, a family receives a higher amount of the child element for the eldest child included in their claim.

The extra amount is £545 per year. This too is being scrapped. Families will continue to receive the higher child element so long as they have at least one dependent child who was born before 6 April 2017.

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Cutting Employment and Support Allowance payments and Universal Credit payments for some disabled adults

Employment and Support Allowance (ESA) is a benefit for adults aged 16-64 who are either unfit to work or who would have great difficulties in working.

It is a sickness benefit that is commonly claimed by many young disabled adults once they are no longer eligible for Child Benefit.

From April 2017 some ESA claimants who make a new claim will receive payments that are much lower than what is paid under the existing rules. Claimants who are affected by these rules will lose out by just over £29 per week

Will everyone who makes a new claim for ESA lose out?

No. This cut only affects ESA claimants who are assessed as falling into the ‘work-related activity group’.

New claimants who are assessed as falling into this group will no longer receive an extra payment to compensate them for being unfit to work. Instead, they will be paid the same amount as a job-seeker without any health problems.

Which ESA claimants are in the work related group?

Within the first three months of claiming ESA, you are put through a medical test known as the ‘work capability assessment’. There are three possible outcomes of this assessment:

you are found fit to work – ESA stops you are placed in the work-related activity group – this means that while it has been

agreed that you are currently unfit to work, it’s decided that you could be made work-ready over time. Payments for those in this group are being cut.

you are placed in the support group – this means that it has been agreed that you are not only unfit to work but that it is also unreasonable to expect you to undertake any activities to make you work-ready. Payments for this group will stay the same.

Currently, of those who are found to be unfit to work:

22 % are placed in the work-related activity group with 78 % in the support group.

Details of the assessment used to decide whether you are placed in the work-related activity group rather than the support group can be seen at https://www.turn2us.org.uk/Benefit-guides/Work-Capability-Assessment/Limited-Capability-for-Work-Related-Activity

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What about disabled adults who get Universal Credit rather than ESA?

The Government are currently in the process of replacing income–related ESA with a new benefit called Universal Credit. Disabled adults on Universal Credit are also put through the work capability assessment.

Those who are placed in the work-related activity group (known in Universal Credit as having a ‘limited capability for work’, but not a limited capability for work-related activity) will see the same reduced support as ESA claimants.

My adult child is already on ESA and has been placed in the work-related activity group. Will their payments be cut?

No. The reduced payment only applies to those whose claim for ESA is treated as starting on or after 3 April 2017. If you claimed before this date you will not be affected.

You should also be exempt if you claim on or after the 3 April 2017 but your claim is backdated to before that date.

An ESA claim can be backdated for up to three months so long as:

you were at least 16 throughout the period in question, and your GP is willing to give you a medical certificate (known as a statement of fitness for

work) backdated for that previous period.

This means that the last date that it will be possible to lodge an ESA claim under the old rules is 2 July 2017.

The situation is more restrictive if you live in an area where Universal Credit full service has replaced ESA. A Universal Credit claim can only be backdated for a maximum of one month.

I currently claim Child Tax Credits and Child Benefit for my 16 year old. Should I help my child claim ESA/Universal Credit now, to ensure they are protected from the risk of lower ESA payments?

The situation is complicated. If your son or daughter claims ESA/Universal Credit, you stop getting Child Benefit and tax credits payments for them. Depending on your circumstances this may leave you worse off, as you may lose more from your benefits than they are paid in ESA.

On the other hand, if you wait and claim ESA/Universal Credit at a later date and they are placed in the work-related activity group, they will receive a lot less ESA than if they were to lodge a backdated ESA claim before 3 July 2017.

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However, please remember that your child is only at risk of losing out in this way if they are placed in the work-related activity group.

If they are placed in the support group then they will not lose out if they put off claiming ESA/UC claim until a later date.

Employment and Support Allowance permitted work limit removed

Although Employment and Support Allowance (ESA) is a benefit for people who are unfit to work, it is possible to do a limited number of hours work without your ESA being affected. This is known as permitted work. To benefit from the permitted work rules the amount of work you do must be:

under 16 hours a week, and your earnings must be no more than £120 per week.

Previously an ESA claimant in the work-related activity group could only do permitted work for a maximum of 52 weeks. At the end of that period they were then expected to either stop claiming ESA or to give up work. However, from 3 April the 52 week limit on permitted work has been scrapped and it can continue indefinitely.

Changes to bereavement benefits

The existing system of bereavement benefits is being replaced by a new bereavement support allowance (BSA). BSA will be time-limited to 18 months. It is expected that most bereaved parents will receive less help under BSA than under the existing system.

Up until now spouses and civil partners of a deceased person who have at least one dependent child, have been able to receive widowed parent’s allowance. The amount paid has varied depending on your deceased partner’s national insurance contributions, with a maximum payment of £112.55 per week.

This is paid until the youngest child ceases to be treated as a dependent child or the parent remarries or moves in with a new partner. Alongside this, a widowed parent would usually also qualify for a lump sum bereavement payment of £2,000.

These payments are being scrapped for surviving spouses or civil partners who are widowed on or after 6 April. In their place a widowed parent can receive BSA made up of a lump sum of £3,500 and 18 monthly payments of £350.

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As the new benefit is only paid for 18 months won’t most claimants be worse off?

Yes - the majority of bereaved parents will receive less support. Under widowed parents allowance the average length of time that a parent received this benefit was 5-6 years, with some claimants receiving the benefit for up to 19 years.

No-one will receive the new bereavement support allowance for more than 18 months. Official figures suggest that 75% of parents bereaved after 6 April 2017 will be worse off. For example, someone who would have qualified for widowed parents allowance for 10 years could lose out by £31,000.

However, not all widowed parents will be worse off. Some low-income families on means-tested benefits could gain. This is because the new benefit is not treated as income for means-tested benefits. This means it is paid on top of means-tested benefits such as Income Support, Housing Benefit or Universal Credit, rather than deducted from them like widowed parent’s allowance.

I currently receive widowed parent’s allowance. Will this stop?

No, existing claimants will continue to receive the same bereavement benefits as before. The new benefit only applies to new claims made on or after 6 April 2017.

Widowed Parents Allowance Bereavement Support AllowanceUp to £112.55 per week £350 per monthPaid alongside lump sumbereavement payment of £2000

Lump sum payment of £3500

Potentially paid until child turns 20 Paid for maximum period of 18 mthsTaxable Non taxableTreated as income for means tested benefits

Ignored as income for means tested benefits

Can only be claimed by spouse or civil partner of the deceased

Can only be claimed by a spouse or civil partner of the deceased

Amount based on overall national insurance record of deceased

To qualify deceased must have paid sufficient national insurance in any one year

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Tax free childcare

From 28 April the Government is introducing a new tax free childcare scheme. Although it has tax in its name, it is nothing to do with the income tax system. Instead the scheme allows you to set up an online childcare account via the GOV.UK website, which you use to pay someone who looks after your child. For every £8 you contribute into this account, the Government will contribute £2.

Warning! If you use the tax free childcare scheme you cannot also receive tax credits or Universal Credit. This means that if you open up a tax free childcare account you lose all of your tax credits or Universal Credit and not just the tax credit/Universal Credit payments you get towards childcare. Most low income families will be better off keeping their tax credits or Universal Credit, so make sure you get advice before applying for tax free childcare.

Who can open up a tax free childcare account?

The scheme is only open to working families. If you are part of a couple:

both of you must work, or one of you must be working and the other must either get certain incapacity benefits or

receive Carer’s Allowance.

To qualify your earnings must usually be at least £120 per week, as must your partner’s. However, you are not eligible if either you or your partner earn more than £100,000 a year.

Special rules will allow some workers aged under 25 and some self-employed people to qualify even if they earn less than £120 per week, for example if they are self-employed and are in the start-up period of a new business.

You must use your tax free childcare account to pay someone who is a registered or approved childcare provider. For instance this might be a registered childminder, nursery, after-school club or a carer from an agency. You can still apply if you normally work but are on paid sick, maternity, paternity or adoption leave. You can also apply if you haven’t started work yet, but expect to do so within 14 days.

How long can I get tax free childcare for?

The scheme covers childcare costs for disabled children until the September after their 16th birthday. For other children they stop being covered by the scheme in the September after their 11th birthday.

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Your child will be treated as disabled if they get Disability Living Allowance, Personal Independence Payment or an equivalent benefit from elsewhere in the European Economic Area. Children who are blind or severely visually impaired are also treated as disabled.

Is there a limit on how much the Government will contribute into a tax free childcare account?

For every £8 you pay into an account, the Government will pay in £2. However, there is a limit on the amount they will contribute.

Where a child is disabled, the maximum amount that the government will contribute is £4,000 per year for that child. So in order to get the full £4,000 Government contribution you, or other family members, would therefore need to contribute at least £16,000. For other children the maximum Government contribution is £2,000 per child per year.

When can I start to use the scheme?

The scheme starts on 28 April 2017, but is initially only open for parents of a disabled child or parents who have at least one child who will be aged under four on 31 August. However, it will be gradually rolled out to other parents during 2017 and should be available to all parents by the end of the year. For updates on when you should be able to apply see www.childcarechoices.gov.uk.

What about employer provided childcare vouchers?

Tax free childcare is being introduced to replace employer supported childcare vouchers. You cannot receive both at the same time. If you are already using childcare vouchers you have a choice of continuing to do so or switching to tax free childcare.

Even if you do not currently use childcare vouchers you can start using them now – so long as you do this before April 2018. After that date no new families can start using employer supported childcare vouchers.

What happens if I do not use the money in my tax free childcare account?

If you decide to stop using the tax free childcare scheme you can withdraw any money that you have built up in your account, with the Government withdrawing the corresponding amount it contributed.

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Scrapping help with housing costs for some 18-21 year olds

From the start of April, new rules were introduced which prevent some single young people who are making a new claim for Universal Credit from receiving any help with their housing costs.

However, this won’t apply to most young disabled people. This is because you are exempt from these restrictions if you are too sick to work or if you get the daily living component of Personal Independence Payment or the care component of Disability Living Allowance at certain rates.

What do the new rules mean?

Currently 18-21 year olds on a low income who rent a property or who have a mortgage can get Universal Credit payments towards either their rent or mortgage interest.

However, from April the Universal Credit rules have been changed so that some single claimants who are at least 18 but under 22 will no longer receive any help with housing costs. This only applies to new claims and existing claimants are unaffected.

Will this apply to all 18-21 year olds with housing costs?

No. Many young people will be exempt from these new rules and will be able to get help with housing costs. This includes young disabled people who get the daily living component of PIP or the middle or highest rate of the DLA care component.

You are also exempt from these restrictions if you are an 18-21 year old who has been assessed as being unfit to work – otherwise known as having a limited capability for work.

Other groups of young people are also exempt, including:

anyone who is a member of a couple full-time carers young parents care leavers those unable to live with parents, and those who are working or who stopped working with earnings above certain amounts.

What about 16 and 17 year olds?

Most 16 and 17 year olds are unable to claim Universal Credit. Those who are able to claim - such as disabled 16/17 year olds, will be exempt from these new rules preventing housing payments.

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What about 18-21 year olds who get help with rent via Housing Benefit rather than Universal Credit?

The Government had previously said that it also intends to scrap Housing Benefit payments for most 18-21 year olds. However, it has yet to announce any new rules limiting Housing Benefit payments.

When do these restrictions on help with housing costs start?

The new rules started from the 1 April. However, they are being rolled out gradually and will only start to apply to a particular Jobcentre once the Universal Credit 'full' service has been introduced to that area.

Currently the full service only applies in a small number of Jobcentres, but it is being rolled out to the rest of the country between now and September 2018.

At the time of writing these restrictions on housing costs do not apply in Northern Ireland, although they are likely to be introduced soon.

New youth obligation for some 18-21 year olds

Alongside cuts to support with housing payments, the Government is also introducing a new Youth Obligation for 18 to 21 year olds on Universal Credit.

Some young people will be expected to participate in an intensive regime of support from day one of their benefit claim. After six months they will be expected to apply for:

an apprenticeship or traineeship gain work-based skills, or go on a mandatory work placement.

However, many young people will be exempt from this requirement, including most disabled 18-21 year olds.

Other Universal Credit changes

April also sees a couple of other changes to the Universal Credit system. In particular there are changes to the way that earnings are taken into account for Universal Credit which makes the system slightly more generous, and the introduction of new conditions on some parents with a child aged under five.

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More generous rules on treatment of earnings

The amount of Universal Credit you receive is affected by the earnings that you have.

Most parents are allowed a ‘work allowance’ – this means that an initial amount of your earnings are ignored. However, any earnings that you have above your work allowance are taken into account as income.

Initially Universal Credit had a taper rate of 65%. This means that for every £1 of earnings you have, 65p was deducted from your Universal Credit award.

However, from 10th April the taper is dropping to 63%. This means that your Universal Credit is reduced by 63p for every £1 of earnings. As a result Universal Credit will now be slightly more generous for working families.

Requiring some parents with a child under 4 or 5 to look for work

When you claim Universal Credit you need to sign a claimant commitment setting out the conditions that you will need to meet in order to be paid benefit. Up until now a parent whose youngest child is aged under five could not be expected to look for work, although depending on the age of their youngest child they could be expected to take part in activities to make them work-ready.

However, from April some parents with a three or four year old will be expected to look for work. In addition, some parents will have to start work –focused interviews when their youngest child turns one, and activities to make them work-ready once their youngest child is aged two.

Please note that some parents are exempt from having to take part in any work conditions and this includes:

anyone who is eligible for Carer’s Allowance, or anyone who is disabled and who has been assessed as having a limited capability for

work and for workrelated activity.

Bedroom Tax Changes

On 1 April 1, the Government amended the bedroom tax rules so that families won’t be penalised if they need an extra bedroom for an overnight carer for their disabled child. At the time of writing these amendments have not yet been introduced in Northern Ireland although it is expected that this will happen at some point during 2017.

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What is the bedroom tax?

If you are a council or housing association tenant, your Housing Benefit will be cut if you have more bedrooms than your family is seen as needing. This is commonly described as 'the bedroom tax'.

These same rules also apply to the amount of help that you get with rent under the Universal Credit system. If you are seen as having one more bedroom than your family needs, the payments you get towards rent are cut by 14%. If you have two spare bedrooms then the cut is 25%.

How many bedrooms am I treated as needing?

Your local council uses rules that are known as the 'size criteria'. For Housing Benefit/Universal Credit purposes, the following are expected to share one room:

every adult couple (unless a couple are unable to share a bedroom for disability reasons – seek further advice if this applies).

two children of the same sex under 16 unless one of them is unable to share due to disability.

two children aged under 10 (regardless of their sex) unless one of them is unable to share due to disability.

The following are treated as needing their own room:

every single adult aged 16 or over a child who is unable to share a bedroom due to their disability and who qualifies for

Disability Living Allowance at the middle or highest rate or the daily living component of Personal Independence Payment.

From 1 April new rules mean that you are also treated as needing a bedroom for a carer, or team of carers, who provide overnight care to a disabled person (including a disabled child). This brings the law into line with the Supreme Court’s decision in the Rutherford case.

I have a bedroom for an overnight carer. How do I prove this is needed?

You must show that your child

both needs and gets regular overnight care, and you must also normally show that your child also gets either DLA care component at the

middle/highest rate or the daily living component of Personal Independence Payment.

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If they do not receive one of these benefits then your Housing Benefit office can use their discretion to include an extra bedroom in your calculation, so long as they are satisfied that overnight care is needed. However, the Universal Credit office cannot use its discretion in this way.

You must show that care is provided regularly. This does not mean an overnight carer needs to be there most of the time, but you must show that care is provided regularly enough that it is reasonable to set aside a bedroom for this purpose.

Size criteria rules for private tenants

Although the 'bedroom tax' is specific to council and housing association tenants, the size criteria rules are also used to decide the amount of help with rent private tenants get. For example, if you rent a private property with three bedrooms but under size criteria rules are seen as needing only two bedrooms, your benefit payments will be capped at the two bedroom rate for your area.

If a private tenant needs a bedroom for an overnight carer looking after someone in their family then this should be reflected in the Housing Benefit/Universal Credit award in exactly the same way as is outlined above for bedroom tax cases.

If you are concerned about how any of the changes will affect you and you family, contact our freephone helpline on 0808 808 3555, email helpline@cafamily.org.uk

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