The Autumn Statement yesterday provided some surety on how households on benefits will be supported through the cost-of-living crisis over the next year, with updates on benefits uprating, tax thresholds and extra assistance for help with increased bills.

In this blog we explain each of the relevant announcements, so you don’t need to dig around in the policy documents. The link to the policy papers is at the end of the blog if you do though.

All changes will be effective from April 2023, unless stated otherwise.

Benefits uprating

After months of speculation on whether rates would increase with inflation or earnings we were pleased to hear that the majority of benefits will be uprated by September’s CPI figure of 10.1%.

This includes the main benefits such as the state pension, the Pension Credit minimum guarantee, Universal Credit, Child Benefit and the majority of tax credits elements (excluding the childcare element, the family element and withdrawal rates and disregards).

It also includes other working age benefits, disability benefits, guardian's allowance and some tax allowances such as the Married Couple’s Allowance and Blind Person’s Allowance.

This includes the benefits cap

One extra, and positive, change is that the benefit cap will also be increased by the same 10.1%. The benefit cap sets a limit on the total amount of income households can receive from certain benefits. However, it’s not been changed since 2016, meaning more and more households fall under its reach despite the living costs increasing every year.

The new annual cap for couples or people with children will be £25,323 (currently £23,000) for families inside London and £22,020 (currently £20,000) for families outside London. For single people the cap will be £16,967 (currently £15,410) for those inside London and £14,753 (currently £13,400) for those outside London.

We will be adding all of the new rates to the calculator later this year so that you can see what it will mean for your entitlements for 2023/24.

Cost of living support packages

As our Director, Phil Agulnik, says in his Are the Cost of Living payments unfair because they create a ‘cliff edge’? blog, the new payments mirror the approach taken when energy costs first increased. However, he goes on to say why he thinks the way they’ve been structured makes them far from perfect, as well as giving his views on a fairer and more efficient approach.

Back to the detail of the payments. Like the existing scheme, there are payments for the following groups:

People on means-tested benefits - 8 million households will receive £900 which will be paid in more than one instalment.

Pensioner households - 8 million pensioner households will receive £300.

People on non-means-tested disability benefits - 6 million people will receive £150.

We have no more details on when the payments will be made. We will update our Cost of Living support help page when the details are released.

Other help that may be available

If you’re not in one of the above groups, but are struggling to cover increased costs, contact your local authority as the Household Support Fund will collectively provide them with £1 billion to help households with the cost of essentials.

On top of the Cost of Living payments, the Energy Price Guarantee will continue to put a limit on the price households pay for each unit of gas and electricity until March 2024. It currently subsidises a typical household’s energy bill to £2,500 a year but, between April 2023 and March 2024, this will become £3,000. 

IMPORTANT This does not mean the amount you can be charged each month is limited. Your exact bill will still be based on how much energy you use.

The equivalent support will continue to be provided in Northern Ireland and the government has said they will review the policy for all regions of the UK if needed.

The Chancellor also announced that households using other fuel, such as heating oil, liquefied petroleum gas (LPG), coal or biomass will receive a £200 payment this winter instead of £100. All households in Northern Ireland will receive this £200 due to the number of houses using alternative fuel to heat their homes.

Tax, NI and the living wage­­

Most Income tax and National Insurance thresholds have been frozen until 2028. It had already been announced many would be frozen until 2026. This means, for example, that employees will not pay income tax or national insurance on earnings up to £12,570 and the 20% basic rate of income tax (plus 12% Class 1 employee national insurance rate) will be applied to earnings up to £50,270 until 2028.

The few changes include the threshold at which higher earners start to pay the 45% rate of tax being reduced from £150,000 to £125,140 and Class 2 and 3 national insurance rates will be increased by 10.1%.

National Living Wage to increase

An increase was also announced to the National Living Wage, which will become:

£10.42 an hour for workers aged 23 and over (9.7% increase)

£10.18 an hour for 21-22 year olds (10.9% increase)

£7.49 an hour for 18-20 year olds (9.7% increase)

£5.28 an hour for 16-17 year olds and apprentices (9.7% increase)

Migration to new benefits

As new benefits are introduced, people on the older systems are usually required to move to the new system, mainly to simplify the administration of the older schemes.

Universal Credit may not feel new because it’s been around for nearly 10 years, but there are still around 2.5 million people claiming one of the older ‘legacy’ benefits that Universal Credit replaced.

The DWP’s latest plan, following a number of previous ones, was that all the 2.5 million people would be migrated to Universal Credit before the end of 2024. However, yesterday it announced a delay for most of the 1 million people who are claiming income-related Employment and Support Allowance (irESA) until April 2028. The delay applies to people who are claiming only irESA or both irESA and Housing Benefit. If they are also claiming Child Tax Credit they will be asked to move to Universal Credit at some point before the end of 2024.

The DWP says it will save the country money

In an online meeting following the Autumn Statement, Neil Couling, the Senior Responsible Owner for the implementation of Universal Credit, told attendees (including entitledto) this decision was based on saving money for the department. He said that claimants on irESA are more likely to benefit from being on Universal Credit and so moving them more slowly would save the country money in the long run.

Mr Couling was also keen to point out that irESA claimants are still able to make a claim for Universal Credit if they believe they will be better off claiming it. Using the benefits calcautor will help you work out if you might be better or worse off claiming Universal Credit but it’s important to seek advice if you’re not sure, because there is no going back once a claim for Universal Credit has been made.

Mr Couling was also keen to point out the delay will not affect the managed migration of other legacy benefits onto Universal Credit but, with several other delays in the last few years, we wouldn’t be surprised if this didn’t pan out as he plans.

Another delay was announced, which affects pensioners claiming Housing Benefit. The government plan to create a new housing element of Pension Credit but this will now not take place until 2028. Until this time eligible pensioners will continue to receive Housing Benefit. 

Help for renters and homeowners

Announcements here were different based on whether you:

Are a social renter – if you rent from your local authority or housing association your rent can only go up by a maximum of 7% from April next year. Your benefits will cover any increase (unless you are affected by the benefits cap).

You rent in the private sector – the help you receive via benefits (Universal Credit or Housing Benefit) to cover your rent is set by the Local Housing Allowance for your local area. This figure will be frozen in April so may not cover any increases in your rent. You may be able to apply for a (Discretionary Housing Payment} from your local authority to cover any shortfall.

You own your own home – you can apply for a loan via the Support for Mortgage Interest (SMI) scheme if you are claiming Universal Credit. This currently doesn’t provide support for the first 9 months of your claim, but it will be reduced to 3 months. You will also be able to claim SMI if you work, which you can’t currently do.

On top of the above, you may find your council tax bill increases as Local Authorities will be allowed to increase rates by 3% based on the needs, resources and priorities of their area, with an extra 2% if they have social care responsibilities.

Increasing income/earnings if on Universal Credit (Sep 2023)

To encourage low earners on Universal Credit to increase the hours they work (or their earnings), starting with a phased rollout from September 2023 low earners will need to meet their work coach on a quarterly basis. This is called the In-Work Progression Offer and will mainly affect households whose income is typically between the equivalent of 15 and 35 hours a week at the national living wage (£365/week for someone aged 23 and over).

This is in addition to the government’s recent announcement to raise the Administrative Earnings Threshold from January 2023, from the equivalent of 12 hours to 15 hours at the National Living Wage, which will bring more claimants in-work and on low earnings into a more intensive regime of work coach support.

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Source: https://www.gov.uk/government/publications/autumn-statement-2022-documents