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Disregards under Universal Credit

11 November 2011


Disregards under Universal Credit

“(7) Regulations made under this paragraph must specify that a particular amount of income shall be disregarded when calculating entitlement to universal credit, including in the following circumstances: a) where the claimant is disabled; b) where the claimant is a lone parent; c) where the claimant is the second earner in a couple and d) where the claimant is a carer.

(8) Where the claimant’s eligibility for an amount of income to be disregarded, in accordance with subsection (7), is based on two or more sets of circumstances, the amount specified for each of these sets of circumstances shall be added together to calculate the total amount to be disregarded.”

Purpose of the amendments

The purpose of paragraph 7 is to ensure that all of these groups, including carers, have a disregard of earnings to reflect the restraints on their earning capacity.

The purpose of paragraph 8 is to ensure that the support given in the current system to people who have more than one reason for needing extra support (eg a lone parent who is disabled) is reflected in the Universal Credit.

How do disregards work?

Universal Credit (UC) has a 65% taper for earned income. This means that if someone earns £100 they will lose £65 from their UC so overall will be £35 better off. A disregard improves the incentive to move into work by not applying the taper to the amount of the disregard.

For example, someone with a £40 disregard who earns £40 will keep all their UC and have £40 earnings. Without the disregard they would have been just £14 better off.

Therefore the end value of the disregard to the claimant is 65% of the disregard amount as this is the extra money they get to keep through not having the taper applied.

Disregards will have a minimum and maximum threshold and will vary according to how much support individuals receive with their housing costs. Most people living in rented accommodation will receive the minimum disregard. Proposed minimum amounts were published in the white paper Universal Credit: welfare that works. However, revised amounts have now been published to take into account extra support for council tax.

Minium disregard as proposed in white paperMinimum disregard as proposed in October 2010
Single person£0£13.50
A couple with one child£20£47
Disabled claiment £40£40
Lone parent with one child£40£53.50
Carer£0£0

What is the purpose of a disregard and why they need to be additive?

The benefits/tax credits system has for a long time recognised that some people as a result of their circumstances have a reduced earning power and therefore need their earnings supplemented when in work.

The disregards in UC are primarily aimed at replacing the support currently provided by tax credits where the amounts are additive. For example a disabled lone parent will receive the disability element of Working Tax Credit (WTC) and the lone parent element of WTC. A couple both of whom are disabled will receive two disability elements in their WTC.

Under UC

A single disabled adult receives up to an extra £44 of support when in work compared to a single adult who is not disabled (£27 work related component and £17 as a result of the increased disregard compared to a non-disabled claimant).

A lone parent who is disabled receives an extra £27 of support (£27 work related component but no extra disregard) when in work compared to a lone parent who is not disabled.

Under the current system

A single disabled adult receives an extra £54 of support through the tax credit system when in work compared to a single adult who is not disabled (£54/week is the disability element of WTC).

A lone parent also receives an extra £54 of support through the tax credit system when in work compared to a lone parent who is not disabled.

How will eligibility be determined?

DBC members: Action for Blind People, Action for M.E., Age UK, Action on Hearing Loss, Ambitious about Autism, Arthritis Care, Breast Cancer Care, Capability Scotland, Carers UK, Child Poverty Action Group, The Children's Society, Citizens Advice, CLIC Sargent, Crohn's and Colitis UK, Cystic Fibrosis Trust, Deafblind UK, Disability Alliance, Every Disabled Child Matters, Guide Dogs, Hafal, Haemophilia Society, Inclusion London, LASA, Learning Disability Coalition, Leonard Cheshire Disability, Livability, Macmillan Cancer Support, Mencap, Meningitis Research Foundation, Mind, Motor Neurone Disease Association, MS Society, Muscular Dystrophy Campaign, Myeloma UK, National AIDS Trust, National Association of Welfare Rights Advisers, National Autistic Society (NAS), National Deaf Children's Society, National Rheumatoid Arthritis Society, Papworth Trust, Parkinson's UK, RADAR, Rethink, Royal National Institute of Blind People (RNIB), Royal College of Psychiatrists, RSI Action, Scope, Scottish Association for Mental Health, Sense, Sense Scotland, Skill, The Stroke Association, Sue Ryder, Transport for All, TUC, United Response, Vitalise.