What is the Benefit Cap?
The Benefit Cap is a rule which limits the amount of benefits you can claim to:
- £384.62 per week for single parents and couples with or without children
- £257.69 per week for single people
The cap is applied to the benefits paid to the household so all the benefit paid to yourself and your partner and dependent children who live in your house are added together to reach the cap.
The cap is applied by reducing either Universal Credit or Housing Benefit so that you don’t get more than the cap limit. If it is applied through Housing Benefit you will always receive at least the minimum amount of Housing Benefit which is 50 p per week.
When do these changes apply
The figures given above are the new Benefit cap figures which were introduced from 7th November 2016 for people who had their benefits capped before this date.
For those affected only by the new cap this will start from 16th January if you live in Coventry and from 23rd January if you live n Birmingham.
Who is affected by the Benefit Cap
The Benefit Cap does not affect any of these people:
- People who are over pension age
- People who live in supported accommodation
- People who are receiving Working Tax Credit or who work enough hours to claim Tax Credits. You can check this here Working Tax Credit eligibility For people who are in receipt of Universal Credit the required level of earnings is £542 per month
- People who do not get Housing Benefit or Universal Credit
- People who have been employed continuously for 12 months and who lose their job through no fault of their own will not have the cap applied for the first 39 weeks of their claim
- People or families where a family member is receiving Disability Living Allowance or Personal Independence Payment, Attendance Allowance, Support Component of Employment and Support Allowance, Limited Capability for Work related activity element of Universal Credit, Industrial Injuries Benefits or War Widows’ or Widowers’ Pension
- People who claim Universal Credit and who earn at least £520 per month either themselves or between both partners of a couple
- People who are eligible for Carers Allowance or Guardian’s Allowance
In Birmingham and Coventry there are not known to be any single people or childless couples affected by the cap. You are more likely to be affected if you have a large family or live in expensive accommodation. Most families with 3 children will have their benefits capped and some families with 2 children will have their benefits capped.
Benefits included in the cap
The cap is calculated by adding together the amounts received from all of these benefits:
- Housing Benefit (except for people in supported accommodation)
- Income Support
- Job Seekers Allowance
- Employment and Support Allowance (remember you are exempted if you are in the support group)
- Incapacity Benefit
- Child Benefit and Child Tax Credits
- Maternity Benefits paid by DWP
- Widow’s Benefits paid by DWP (there is a £15 per week disregard on widowed parent’s allowance and widowed mother’s allowance)
- Severe Disablement Allowance
- Universal Credit
All other benefits do not count towards the cap. This includes Bereavement Support Payment.
What can you do if the cap is applied to you?
You should check whether the decision is correct by checking the rules given above.
You should check whether you or a family member could get a benefit which would give you an exemption from the benefit cap such as Personal Independence Payment or Disability Living Allowance. If you are not sure about this you should seek advice.
You could consider whether you could increase your hours or take a job to avoid the cap.
You could consider reducing your outgoings so you can manage on your reduced income.
You could ask your local council whether you are eligible for Discretionary Housing Payment to help with your income shortfall.
If you are threatened with homelessness because of the cap you should seek advice.
What can you do if the cap applies to you?
If you identify that the cap will be applied to you, you should consider whether you can change your benefits situation so that the cap does not apply to you. For example you could make a claim for a family member for Disability Living Allowance or Personal Independence Payment. The other benefits which will gain you an exemption are Support Group of Employment and Support Allowance, Working Tax Credit, Industrial Injuries Benefits, War Widows Pensions, Attendance Allowance, and entitlement to Carer’s Allowance or Guardians Allowance. Claiming one of these benefits will give you a long term solution to the benefit cap.
Benefit Cap legal challenges
There has been a successful legal challenge to the benefit cap for lone parents with children aged under 2 in the High Court in June 2017. The DWP have said they will be appealing against this decision. This challenge was brought by Child Poverty Action Group and the argument used and accepted by the court was that the Benefit Cap unlawfully discriminates against women and the children of lone parents as they are more likely to be capped than other groups.
A further legal challenge which concerns single parents with older children is now also going though the courts and it is advised that all single parents who have had their benefits capped should appeal against their benefit cap decisions to ensure that they can benefit from the High Court decision. These cases will be delayed while the test cases go through the court processes but if they are successful people who have appealed can get their benefit reinstated. Advice agencies will be aware of the test cases and can provide advice on the wording of appeal forms in these cases.
These cases are now progressing through the Supreme Court and were heard in July 2018.
How the Benefit Cap works for people on Universal Credit
Some people who had the benefit cap applied under Housing Benefit did not have their benefit reduced to the £384.62 figure.
For example if the total weekly benefit was £550.00 per week of which Housing Benefit was £130.00, the total would be reduced by the amount of the Housing Benefit less 50p so would be reduced by £129.50 leaving the claimant with an income of £420.50. This would be above the benefit cap but would still mean that the claimant would have to pay their rent out of the money allocated to the family and children.
The Benefit Cap will also be applied to Universal Credit but with significant differences. The exemptions from the cap will continue to be applied although an inability to share information with advice agencies will make it more difficult to do take up work to enable claimants to gain exemptions. Mortgage interest payments will also be included in the cap. This means that there will be new people affected by the cap and that the limits on the cap imposed by the level of rent will be removed.
In effect, this means that unlike the example given above, as Universal Credit is one benefit with different elements, the whole amount can be capped rather than just the HB under the legacy benefit system.
For example – a claimant who is in receipt of a total amount of £2,400 a month, of which £550.00 is housing costs for rent, will now be capped all the way down to £1,666.67, whereas under the previous system, only the housing benefit part would have been capped.
This is especially concerning for those claimants who have to move onto UC early due to a change of circumstances – especially a lone parent with 3 or 4 children and a high rent whose youngest child turns 5 who will not only find themselves on UC rather than JSA but may find that they are capped at a higher rate than they were under the legacy benefit system.