The Benefit Cap
What is it?
The benefit cap means that your benefit entitlement will be limited to an amount which is roughly the same as average earnings. The benefit cap will be applied to people of working age.
The thinking behind the benefit cap is that it is unfair that people on benefits should receive more than people who are in full-time work.
How much will I get if the benefit cap applies to me?
The figures for the year April 2013 to March 2014 are:
- For a couple, a lone parent or a couple with dependent children, £500 per week
- For a single person, £350 per week.
This means that if you have a family and are on benefits, the maximum you will get per week is £500 (this includes Housing Benefit towards your rent). If you live alone the maximum you will get is £350 per week.
If my money is reduced, how is this done?
The reduction in your weekly income is done by reducing the amount the local authority pay to you in your Housing Benefit.
Example – if your benefit from the DWP is £200 per week and your full Housing Benefit is £350 per week, your Housing Benefit will be reduced by £50 per week to bring your income down to £500 per week total.
Because this reduction is done through Housing Benefit, Owner Occupiers getting help with their mortgages are not immediately affected, However, the Government has said that owners on Universal Credit will be affected when the Universal Credit system comes in.
Is all my benefit taken into account when working out if I will be capped?
The following benefits are taken into account, i.e. these are the ones which are added up to work out if your income will be over the threshold:
- Bereavement Allowance
- Carers Allowance
- Child Benefit
- Child Tax Credit
- Employment and Support Allowance (if you’re in the work-related activity group)
- Guardians Allowance
- Housing Benefit
- Income Support
- Job Seekers Allowance
- Maternity Allowance
- Severe Disability Allowance
- Widowed Parents Allowance
I don’t see Incapacity Benefit or Council Tax Benefit in this list
Council Tax benefit ceases to exist from April 2013, and will be replaced by a new system run by local authorities.
Incapacity Benefit claimants will have been put on Employment and Support Allowance by the time these caps start to bite.
Are any benefits ignored?
Yes,
- Social Fund Payments
- In-work credit
- Return to Work Credit
The following benefits are also exempt, i.e. they are not taken into account when adding up the other benefits which go towards the total to see if you will be capped
- Working Tax Credit
- Disability Living Allowance
- Personal Independence Payments (when they come in later this year)
- Employment and Support Allowance (if you’re in the support group)
- Attendance Allowance
- Industrial Injuries Disablement Benefit
- War Pensions & War Widows pensions
- Pension Credit
- Retirement Pension.
Is anyone exempt from this cap?
If you are of working age, there are certain groups who will be exempt from the cap.
These are:
- War widows and war widowers
- If you, your partner or a dependent child receive Disability Living Allowance (or Personal Independence Payments when these replace DLA)
- If you have recently become unemployed after working throughout the previous 12 months. This will mean you will not face a cap until 39 weeks into your claim.
- The government says that working families on Universal Credit will be exempt but there has been no further information on exactly who they mean by this, e.g.how many hours someone in the family has to work.
But I am the full-time carer of my disabled relative, who is now an adult. Do I avoid the cap?
No. The regulations that the government has recently produced say that in order to avoid the benefit cap the disabled person has to be your partner or a dependent child (in the sense that you are getting Child Benefit for them). Once they claim in their own name the regulations say that they are no longer your dependent and the cap will apply.
The case study at the end of this briefing gives an example of this.
When does all this happen?
The cap will be piloted in 4 London Boroughs from April 2013 (Bromley, Croydon, Enfield and Haringey). It will come into effect across the rest of the country in September 2013.
If my money is cut, can I get any extra help?
Local authorities are getting extra funding from central government so they will have larger budgets with which to pay Discretionary Housing Benefit. You will be able to apply for this money, but there is no guarantee that it will cover your shortfall.
Other ideas according to the government’s website are
- See if you qualify for an exempting benefit
- Live within your means
- Move or get cheaper accommodation.
If my adult relative gets DLA and so is exempt from the cap, can I get the landlord to put the tenancy in my relative’s net and so avoid this restriction?
This isn’t likely to work, even though its sounds attractive. There are restrictions in Housing Benefit regulations towards paying people who were formerly non-dependents in the household, and a local authority may well take a view that this would be a contrived arrangement to get Housing Benefit.
CASE STUDY
A - Mrs Smith is a single parent with 3 dependent children. Dave, her eldest son is 17 and has severe learning disabilities. He is at a full-time course at his local specialist college and needs continual help and supervision. Dave gets Disability Living Allowance at the highest rate (care) and lower rate (mobility).
She has twins, Mark and Julie, aged 14. They do not have disabilities. Mrs Smith gets Carers Allowance, Income Support, Child Benefit, Child Tax Credit , Council Tax Benefit
and Housing Benefit. She lives in Westminster and gets the Local Housing Allowance for her 4 bed-roomed house which she rents privately. This is £400 per week.
Her weekly income is:
Child Benefit
£47.10
Carers Allowance
£58.45
Child Tax Credit
£188.56
Income Support
£45.15
DLA (care - Dave)
£77.45
DLA (mob – Dave)
£ 20.55
Housing Benefit
£400.00
Total £837.26
In this situation she will not be faced with a benefit cap, even though her income from benefits is in excess of £500 pw. This is because Dave receives DLA and is her
dependent child in the sense that she still receives Child Benefit for him.
B – In this case, Dave is now 19 and has stopped going to college. Mrs Smith no longer gets Child Benefit for him and he has applied for Employment and Support Allowance. He has been awarded this and has been put in the support-related activity group. Because he cannot manage finances Mrs Smith acts as his appointee. He still lives with his Mum and siblings and in practice his benefits go into the overall household income.
Dave receives:
DLA care
£77.45
DLA mobility
£20.55
ESA
£99.15
Total £197.15 pw
Mrs Smith receives:
Child Benefit
£33.70
Carers Allowance
£58.45
Child Tax Credit
£113.94
Income Support
£45.15
Housing Benefit
£400.00
Total £651.24
In this case the sum of Dave’s and his Mum’s income is a little more than they got when he was her dependent, £848.39 pw compared to £837.26 pw.
However, Dave is no longer “dependent” on her in benefit terms and so Mrs Smith’s benefit will be capped to the maximum of £500 per week.
This equates to a reduction in her own claim of £337.26 per week, and a reduction in her and her son’s income combined of £140.11 pw.
This will leave the family with some very stark choices. The total Mrs Smith will get is £500. Her Housing Benefit will be reduced to £248.76 p.w. for this to happen.
NB – for illustration purposes the benefit rates for 2012/13 have been used, even though these caps only begin to come in from April 2013 onwards. In any event any benefit increases for 2013/14 will be small and will not greatly alter the general result of a case study such as the above.
Because Council tax benefit is no longer in operation from April 2013, the Council Tax rebate has been left out of the scenario. In practice, however, we would would expect that families like the Smiths may not necessarily get 100% reduction of their Council Tax bill in the future because the government has said that any new scheme a local authority introduces has to fully protect older people. This may be at the expense of other people on low incomes.