Benefit cap

Benefit Cap

Benefit Cap ruled illegal for lone parents with a child under 2

In a new judgement (22 June 2017), the High Court has ruled that the application of the benefit cap to lone parents with children under two is unlawful because of its discriminatory impact. This specific group are less able to enter the workplace in order to relieve the effects of the cap.

The Government immediately announced that it will appeal against the ruling and said it had been granted permission to do so. The Department for Work and Pensions has issued guidance stating "while this is in train, DWP and local authorities should continue to apply the benefit cap as now. The legislation remains unchanged and so there is no change to the application of the cap to lone parents of children aged under two". 

Benefit Cap 2016

The benefit cap is a limit on the total amount of income from certain benefits a household can receive. 

It is set at a different level depending on whether you live inside or outside London.

The benefit cap is:

  • £442.31 a week if you are a couple or have children and live in London
  • £384.62 a week if you are a couple or have children and live outside London
  • £296.35 a week if you are a single person and live in London
  • £257.69 a week if you are a single person and live outside London

If you are affected by the benefit cap your Housing Benefit or Universal Credit housing element will be reduced.

Previous benefit cap levels, before 7 November 2016, were £500 per week if you have children or are a couple, and £350 per week for single people with no children.

Benefits included in the cap

The benefits included when seeing if your benefit income exceeds the benefit cap are:

  • Housing Benefit
  • Child Benefit
  • Child Tax Credit
  • Jobseeker's Allowance
  • Incapacity Benefit
  • Income Support
  • Employment and Support Allowance (except when in the support group)
  • Maternity Allowance
  • Severe Disablement Allowance
  • Widowed Parent's Allowance & Bereavement Allowance
  • Universal Credit

Council Tax Support, the replacement for Council Tax Benefit, is not included in the cap. One-off payments like the social fund are also not included.

Exemptions

You will not be affected by the cap if:

  • you are over pension age
  • you are in work and entitled to Working Tax Credit (even if you don't receive a payment because your income is too high)
  • you are in work and earning more than £430 per month if receiving Universal Credit (this will change from April 2017)
  • you have recently been in work - see exemptions for current or recent work
  • you, your partner or a child receives a disability benefit - see exemptions for disability
  • you or your partner receive Carer's Allowance (or are entitled but do not receive a payment because of other benefits you receive)
  • you, or your partner receive Guardian's Allowance
  • you live in supported exempt accommodation
  • you do not receive Housing Benefit or Universal Credit

Exemptions for disability

If you receive any of the following disability benefits you will be exempt from the cap:

  • Disability Living Allowance
  • Personal Independence Payment
  • Constant Attendance Allowance
  • Attendance Allowance
  • Industrial Injuries Disablement Benefit
  • Employment and Support Allowance with a support component
  • Armed Forces Independence Payment
  • Limited Capability for Work Related Activity element of Universal Credit
  • War widows and widowers will also be exempt

Exemptions for current or recent work

The benefit cap is intended to increase work incentives so there is an exemption for households that are considered to be "in work." You will be considered in work and be exempt from the benefit cap if you are entitled to Working Tax Credit or receiving Universal Credit and earning more than £430 per month.

From 1 April 2017 the in work exemption for Universal Credit will change so you will be exempt if your weekly earnings (after tax and national insurance) are equal to or greater than the equivalent of 16 times your National Minimum/Living Wage rate, rather than a flat rate of £430 per month/£100 per week. When calculating the level of the earnings exemption threshold the amount is rounded down to the nearest whole pound so the required earnings from 1 April 2017 are as follows:

  • 25 years and older £120 per week
  • 21 to 24 years old £112 per week
  • 18 to 20 years old £89 per week

In addition, there is a “grace period” meaning that if your circumstances change because your job has ended there is a 39 week period before your benefits are reduced. This applies to people who are over the benefits cap but had been in work for at least 16 hours a week for 50 out of the 52 weeks immediately before their last day of employment.

You are still counted as employed when on statutory maternity leave, paternity leave, adoption leave or when receiving Statutory Sick Pay (SSP) so if you do not return to work the grace period would start the day after the period of leave ends, or the last day of payment of SSP. However, if you receive Employment and Support Allowance, Income Support or Jobseeker's Allowance during your period of leave, the grace period will start from the date you claim this benefit even if the statutory benefit is still in payment.

How is the Benefit Cap applied?

If you receive more than the benefit cap allows then your local council reduce your Housing Benefit or the DWP reduce your Universal Credit housing element until you are brought back within the cap.

Your local council may be able to provide some assistance through a Discretionary Housing Payment if you struggle to meet your housing costs as a result of the benefit cap.

Extra assistance in Northern Ireland

Regulations have been brought in to introduce 'Welfare Supplementary Payments' to be paid to any households with children in Northern Ireland who have their benefit reduced due to the cap. The payments will match the amount by which their benefit is reduced, effectively meaning they are no worse off. These payments will remain until 31st March 2020.

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