MARTIN Lewis’ MoneySavingExpert.com (MSE) has issued an urgent Universal Credit warning for millions of people.
In the latest MSE newsletter, Martin warned parents claiming tax credits to check if they can switch to Universal Credit.
Martin Lewis has urged those on tax credits to check if they can switch to universal credit
That’s because those on the legacy benefit qualify for childcare support.
From Wednesday June 28, the amount of childcare support people on Universal Credit can get is being increased.
Hundreds of thousands of parents will get a monthly £522 boost to their childcare payments.
The maximum amount of cash parents can claim will also go up from £646 to £951 for one child, and from £1,108 to £1,630 for two – an increase of just under 50%.
It’s a huge win for HOAR’s Make Universal Credit Work campaign, as it means they won’t have to pay hundreds of pounds only to claim it back later.
However, parents on tax credits alone won’t qualify for the extra help.
Martin said they should therefore check if they can switch to Universal Credit and then check if they can get childcare support.
The newsletter said: “The government estimates up to 1.4million people (including some groups without children) would be better off switching from legacy benefits to universal credit (most will be switched regardless by the end of 2024, for a few it could be 2029 though).
“Check NOW, but do read the warning below before taking action.”
To see if you qualify for Universal Credit you can use MSE’s 10-minute benefits calculator or head to the gov.uk website.
You’ll be asked questions based on your income and other support you get so make sure you’re as thorough as possible.
If you are approved, you’ll be able to claim back up to 85% of childcare costs.
However, it’s important to bear in mind that switching might not be the best option for you.
Martin said: “If the calculator shows it may be worth switching, don’t just do it, as once you apply to switch to UC you can’t change your mind, even if it turns out to be far worse.
“You need to make sure you know the impact.”
Some of the issues claimants should be aware of are:
- Deductions – Universal Credit payments can be cut up to 25% to auto-repay certain debt like missed rent or council tax bills
- Budgeting – you’ll be paid in a lump sum so you’ll need to make sure you’re prepared each month
- More working hours – those on Universal Credit might be required to work 35-hours a week but tax credit claimants only need to work 30, so you’ll need to make sure you’re prepared for that too
What is Universal Credit?
Universal Credit is a welfare scheme which was designed to combine a number of old “legacy benefits” into a single monthly payment.
Whether you are eligible will depend on your specific circumstances.
You may be eligible if you meet all of the following criteria:
- you’re on a low income or out of work
- you’re 18 or over (there are some exceptions if you’re 16 to 17)
- you’re under State Pension age (or your partner is)
- you and your partner have £16,000 or less in savings between you
- you live in the UK
How much is Universal Credit?
Universal Credit payments are made up of a standard allowance and then various additional payments that depend on your circumstances.
This is how much you will get as your standard allowance each month:
- Single, under 25 – £292.11
- Single, 25 or over – £368.74
- Couple, joint claimants both under 25 – £458.51 (for both of you)
- Couple, joint claimants, one or both 25 or over – £578.82 (for both of you)
You may get additional payments, for instance, if you:
- have children
- have a disability or health condition which prevents you from working
- need help paying your rent
What other childcare help is available?
There are a range of tax breaks and grants to help make childcare more affordable.
You can usually use them for care like registered childminders, nannies, playschemes, nurseries, and holiday clubs.
It’s always worth checking the government’s handy childcare costs calculator to find out which scheme will save you the most money, as not all of them can be used at the same time.
Free childcare for two-year-olds
Parents living in England and claiming any of the following benefits can access some free childcare for their two-year-olds:
- Income support
- Income-based jobseeker’s allowance (JSA)
- Income-related employment and support allowance (ESA)
- Universal Credit (where household income is £15,400 a year or less after tax, not including benefit payments)
- Tax credits (where household income is £16,190 a year or less before tax)
- Pension Credit (guaranteed element)
Two-year-olds can also get free childcare if they:
- Are looked after by a local authority
- Have an education, health and care (EHC) plan
- Get disability living allowance
- Have left care under an adoption order, special guardianship order or a child arrangements order
You may have to pay for extra costs like meals, nappies or trips.
Contact your childcare provider or local council to find out more.
15 or 30 hours of free childcare
All three to four-year-old children in England are entitled to 15 hours of free childcare – amounting to 570 hours per year – from the term after their third birthday.
The free allowance is usually taken as 15 hours per week for 38 weeks of the year, but it is possible to take it at a time that suits you.
The free early education and childcare must be with an approved childcare provider and stops when your child starts school.
Working parents may be eligible to get up to 30 hours of free childcare if they are working at least 16 hours a week on average and earning the National Minimum Wage or more.
Check out what you could get and apply online at Gov.UK.
If you don’t qualify for Universal Credit you may qualify for tax-free childcare.
You can get up to £500 every three months – up to a maximum of £2,000 a year – for each of your children to help with the costs of childcare.
If your child is disabled, it’s even more – £1,000 every three months, up to £4,000 per year.
To receive the tax-free benefit you need to create an online childcare account.
For every £8 you pay into this account, the government will add £2 which you can use to pay your approved provider.
You can get child benefit if you’re responsible for a child aged under 16, or if they are under 20 and in approved education or training.
Child benefit is currently worth £24 a week for the eldest child or only child, adding up to £1,248 a year.
For each subsequent child, parents get £15.90 a week – or £826.80 a year.
The free money is paid every four weeks, and there’s no limit to how many children you can apply for – though only one person can claim for each child.
But do note that those who earn more than £50,000 a year may need to pay back some of their child benefit in tax.
While this help isn’t directly for childcare, the money can help to cut costs.
Use local charities
Certain organisations, such as the YMCA and local church groups, sometimes run after-school clubs for free.
Check whether there are any eligibility requirements by speaking to the organisation directly.
These services are intended for those who can’t pick their children up from school due to work responsibilities, for example.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]