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Budget update October 2021

October 27, 2021 – Wendy Alcock Phil Agulnik
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The Chancellor said at the start of his budget speech in the House of Commons today that “we will always give people the support they need and the tools to build a better life for themselves.”

In the world of welfare, the headline grabbing changes to Universal Credit's taper rate and work allowances go some small way towards this, but after digging though the full set of Autumn Budget and Spending Review documents there wasn’t much else we found to corroborate this.

Here’s a summary of the benefits changes we found in the 100s of pages of supporting and related information. It’s split into new announcements and confirmation of changes we already knew about.

New announcements

Increasing the Universal Credit work allowances  

By 1 December 2021 the Universal Credit work allowances (the amount someone can earn before their Universal Credit award begins to be reduced) are increasing by £500 a year, or £42 a month.

These allowances are only available to households with children or a disability, so miss a large proportion of workers.

The revised allowances will be:

  • £335 per month (was £293), where UC includes help with rent.
  • £557 per month (was £515), where UC doesn't include help with rent.

Lowering the Universal Credit taper rate

Also, by 1 December 2021, the Universal Credit taper rate is dropping from 63% to 55%. This means working households claiming Universal Credit will get to keep an additional 8p for every £1 of net income they earn over their work allowance, if one applies.

Importantly this change doesn’t help workers on the old legacy benefit of Working Tax Credit, which at the last release of statistics earlier this year was still being received by over a million households. It also doesn’t help people claiming Universal Credit if they are looking for work or are not able to work, for example they are carers or are disabled. This is over 60% of UC claimants.


Here’s our Director Dr Phil Agulnik musing on these changes:

The Chancellor’s announcement of help for working Universal Credit (UC) claimants is welcome. For many of them it will more than compensate for the ending of the £20 uplift, though very low earners will gain little and unemployed UC claimants nothing at all. But the announcement has a number of surprising effects.

First and foremost it extends the reach of UC up the income scale. That’s because lowering the taper rate means it’s easier to qualify with higher earnings. Part of the £2 billion cost of this measure therefore comes about because more low and middle income households now qualify for UC.

This also means, a small but growing number of people with children will now qualify even though they are higher rate tax payers. Families with high costs or needs, because of childcare, high rent or a large number of children, are now more likely to qualify with earnings over £50,000.

The other really big implication of the Chancellor’s announcement is on people who are in work but still on so-called ‘legacy’ benefits (including Housing Benefit and tax credits). With the new taper rate (and work allowance) it becomes more likely that employees (but not the self-employed, due to the Minimum Income Floor) will now be better off on UC than on tax credits, particularly if they rent. There are some circumstances where this doesn't apply, but if someone's in work it’s worth checking to see if they would be better off on UC.  

In practical terms these changes mean it’s more important than ever for people to check if they can claim UC. Our calculator will show people whether they qualify under the new rules announced by the Chancellor. And even if they don’t qualify now it’s worth checking again if their circumstances change, or in April when entitlement will extend further again.


Extension of the Universal Credit managed migration roll out

The move of existing ‘legacy’ working age benefit claimants to Universal Credit was due to be completed by September 2024 but is now planned to be finished by March 2025However, experience suggests this date could be put back again at some point.

Date of Pension Credit to Housing Benefit merger

While not totally new, as we’ve known for years this would be happening at some point, the government’s plans to create a new housing element of Pension Credit to replace pensioner Housing Benefit are now planned to take place from 2025.

This is the first time they’ve specified a date, which is due to coincide with the end of the migration of existing working-age Housing Benefit claimants to Universal Credit. We also wouldn’t be surprised if it ends up happening later though, as the UC migration has taken many more years than first anticipated!

Change to Shared Accommodation Rate exemptions

Planned exemptions to allow victims of domestic abuse and victims of modern slavery to claim the higher 1-bedroom self-contained Local Housing Allowance rate will now come into force in October 2022 instead of October 2023.

Extension of the Universal Credit surplus earnings threshold

The current surplus earnings threshold for Universal Credit of £2,500 will stay in place until at least April 2023. It was due to reduce to £300 from April 2022.

Confirmation of changes we already knew

Increase to National Living Wage

From 1 April 2022 the National Living Wage is increasing to £9.50 from £8.91 an hour for anyone age 23 or over. For other ages, the changes are as follows:

  • for 21 to 22 year olds the increase is from £8.36 to £9.18 per hour
  • for 18 to 20 year olds the increase is from £6.56 to £6.83 per hour
  • for 16 to 17 year olds the increase is from £4.62 to £4.81 per hour<
  • for apprentices the increase is from £4.30 to £4.81 per hour

Waiting days for new style ESA claims

During the pandemic anyone affected by Covid-19 who needed to claim new style Employment and Support Allowance received help from day one of their claim, as the usual eight waiting days were removed. This provision has been extended until 24 March 2022.

Household Support Fund via local authorities

The Household Support Fund was launched by the government in October 2021 and will be available until March 2022. It is intended to help vulnerable households who have been impacted by Covid-19 with essential costs such as food, energy bills, water bills and other essentials over the winter. Help with housing costs may also be available in cases of emergency. 50% of the money is due to be allocated to people with children.

Minimum Income Floor reinstated

The temporary suspension of the Minimum Income Floor (MIF), put in place in March 2020 to provide additional support for self-employed people on low incomes during the Covid-19 pandemic, has gradually started being reintroduced since 1August 2021.


We hope you found this a useful summary. If we find more detail on any of the announcements we’ll post them on our social media channels, so please do follow us on Twitter, Facebook and LinkedIn.



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