Universal Credit loophole means thousands of key workers could lose £500 bonus
THOUSANDS of key workers in Wales could lose out on a £500 Covid bonus if they are claiming Universal Credit.
Frontline healthcare workers in the country have been promised a one of payment from the Government to thank them for their hardwork throughout the pandemic.
The bonus is worth £735 but most people will receive £500 after national insurance and tax deductions, the Welsh Government said.
But now officials have admitted those who claim Universal Credit might not benefit from the boost by as much as they should.
This is because the welfare payments are means tested, so the amount you receive every month is based on your income.
It is also subject to the taper rate, which reduces your benefit payment by 63p for every £1 earned above a certain threshold.
What is the taper rate?
UNIVERSAL Credit is means tested, meaning how much you earn every month can affect how much you’re entitled to in welfare.
The rate is currently set at 63%, so for every £1 you earn above a certain threshold, 63p is deducted from your benefits.
The threshold is called your work allowance.
Exactly how it affects your monthly payments depends on your circumstances and will differ between claimants.
But for claimants who do no receive help with housing cost, the work allowance is set at £515.
For those who do get help paying their rent, the threshold is set at £293 a month.
The Sun has been campaigning for the rate to be reduced so Brits can hold onto more of their hard earned cash.
For some, the bonus could see a portion deducted from their welfare payments meaning they will barely keep hold of the extra pay.
Exactly how it will affect claimants depends on their individual circumstances – you can see the different taper rate thresholds in the box above.
However, a single parent who doesn't get help with housing costs will see their welfare payment reduced if the bonus takes their income above £515.
For example, if their income is usually on the threshold but the £500 bonus brings their income for the month up to £1,015, £324.45 will be deducted from their Universal Credit payment.
One nurse affected by the deductions told WalesOnline it felt like "a massive slap in the face".
She said: "I didn't see my kids for six weeks at the start of the pandemic – not only did I sacrifice my time with them but I was also risking my life.
"This bonus is getting taxed at source so it's more than £200 less than the payment that's been given."
What to do if you have problems claiming Universal Credit
IF you’re experiencing trouble applying for your Universal Credit, or the payments just don’t cover costs, here are your options:
- Apply for an advance – Claimants are able to get some cash within five days rather than waiting weeks for their first payment. But it's a loan which means the repayments will be automatically deducted from your future Universal Credit payout.
- Alternative Payment Arrangements – If you're falling behind on rent, you or your landlord may be able to apply for an APA which will get your payment sent directly to your landlord. You might also be able to change your payments to get them more frequently, or you can split the payments if you're part of a couple.
- Budgeting Advance – You may be able to get help from the Government for emergency household costs of up to £348 if you're single, £464 if you're part of a couple or £812 if you have children. These are only in cases like your cooker breaking down or for help getting a job. You'll have to repay the advance through your regular Universal Credit payments. You'll still have to repay the loan, even if you stop claiming for Universal Credit.
- Cut your Council Tax – You might be able to get a discount on your Council Tax by applying for a Council Tax Reduction. Alternatively, you might be entitled to Discretionary Housing Payments to help cover your rent.
- Foodbanks – If you're really hard up and struggling to buy food and toiletries, you can find your local foodbank who will provide you with help for free. You can find your nearest one on the Trussell Trust website.
Another NHS worker said their bonus will be reduced to just £195 after national insurance, tax and Universal Credit taper rate penalties have been taken into account.
Frontline healthcare workers in Northern Ireland who claim Universal Credit may also be affected as they have also been promised a bonus worth £500.
In Scotland, key workers entitled to a £500 bonus are able to split the payment over multiple months to avoid it hammering their Universal Credit payout.
Only frontline healthcare workers in England have not been promised a one-off Covid crisis bonus.
A spokesperson for the Department for Work and Pensions (DWP) told The Sun: “We thank all NHS staff who have worked tirelessly throughout the pandemic.
"Universal Credit is a means tested benefit – bonuses are treated as earnings and payments are gradually reduced as someone’s earnings increase."
The £500 bonus payment is different to the £500 tax credit payment announced by the Chancellor in the Budget last month.
The second payment is for those who claim working tax credit to support them through the Covid crisis.
The payout is supposed to echo the six month extension to the £20 a week boost in Universal Credit payments that was announced last month.
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