Universal Credit

Dontknowanymore

Well having read and read this thread, I am totally confused!

comping_cat

Am i correct in saying that this year (2012/13) is still the tax credit system, and its next year (13/14) that the UC system starts?

I would also be interested to see if for self employed people, its income before or after tax they consider!

zagfles

HappyMJ wrote: »

You are right that if you increase fees others may not be able to work. Under Universal Credit there is a penalty where so many more parents will choose to only have 1 working parent. The government knows that and is trying to encourage every family to at least have one working parent. The penalty for having a second full time working parent is having a marginal deduction rate close to or more than 100% when taking 30% of the childcare costs into account meaning that parents who choose to have two working adults will have to pay more than they earn to go to work. Many will choose to stay at home looking after their own child rather than a childminder so you can expect your workload to go down in any case.

i.e Earn £1 over personal allowance. The parent would pay 20 pence in tax 12 pence in NI. They would get an increase in their UC entitlement of 56 pence (70% of 80p-average childcare costs for 2 children for a week divided out over weekly earnings) to take into account the costs of childcare. They would then lose 44.2 pence of UC due to the 65% withdrawal rate on the remaining income after tax and NI. Then they have to pay 80 pence out in childcare costs. So to go to work it would cost a parent 0.2 pence for every pound that they earn. That is a negative incentive to earn any more or even continue with working and childcare. It doesn't matter how much a parent earns per hour this applies to every working parent with childcare costs.

Looking the briefing document it seems childcare will be treated basically the same as now under tax credits.

http://www.dwp.gov.uk/docs/ucpbn-10-childcare.pdf

So I don't see how your last sentence makes sense, you're making the assumption that childcare always costs 80% of what they earn, ie that every extra £1 earned results in childcare costs of 80p. But if two mums use the same childminder and one earns double what the other does then clearly their childcare costs as a proportion of what the earn will be vastly different.

There will be a break-even point in terms of the childcare/earnings ratio, just as there is now. This will be a bit lower under UC for those above the tax/NI threshold and a lot lower for second earners under the threshold compared to tax credits alone (not accounting for other benefits).

So it certainly will discourage second earners compared to now, but it will encourage first earners, and that's not a bad thing. One of the problems at the moment is the sharp divide between 2-earner households and no-earner households, because there is far greater incentive for a second earner than a first, due to independant taxation combined with benefit withdrawal.

shedboy94

HappyMJ wrote: »

I understand as I generally don't work and am better off but I do some work as I am self employed working 30 hours a week and earning very little profit (£40 per week plus car/travel, laptop, phone, broadband, the occasional overnight stay somewhere including all meals and a fully furnished home office) therefore claiming working tax credit (£52 per week) and local housing allowance (£91 per week) and council tax paid for and being much better off than if I had a PAYE job. I just can't take a PAYE job as it just is not worth it for the reasons that have been given. The main one being travel to work expenses are claimable as self employed and they are not when employed as an employee under PAYE.....and besides I've hated every PAYE employee job I've had and I'll never take one ever again.

Although UC will change all that as I would be considered to only be in employment for under 7 hours a week in the new system and would be expected to increase earnings at a marginal deduction rate of 76%. Not really worth it but much better than the current 96%.

So what is it then.......do you work or don't you? I don't understand how you can "generally don't work", but then in the same sentence say you work 30hpw. What do you do for 30hpw that you only earn £40 from???

bloomingflower

comping_cat wrote: »

Am i correct in saying that this year (2012/13) is still the tax credit system, and its next year (13/14) that the UC system starts?

I would also be interested to see if for self employed people, its income before or after tax they consider!

http://www.disabilityalliance.org/f55.htm

Timetable as follows:

End of February 2012 - Royal assent of the Welfare Reform Bill.
October 2012 (approx) - Main UC regulations published.
April 2013 - Pathfinder area used to test UC.
Between October 2013 and April 2014 - If you are making a new claim you will receive universal credit in place of jobseekers allowance, employment support allowance, housing benefit, working tax credit or child tax credit. You will also be moved onto UC if you are already receiving one of these benefits and your circumstances change significantly, such as if you find work or if you have a baby.
From April 2014 - You may be moved onto UC if it is considered that you will benefit from this - For example if you are on working tax credit and work a small number of hours a week but could work more hours with support from UC.
From the end of 2015 to the end of 2017 - If you have not been moved onto UC already you will be moved during this time.

also >>http://www.dwp.gov.uk/newsroom/press-releases/2011/nov-2011/dwp123-11.shtml

This is also interesting reading in regards to the upcoming benefit changes for the next few years going up to 2016! >> (Benefit Changes Timetable)
>>>http://www.turn2us.org.uk/information__resources/benefits/news_and_changes/benefit_changes.aspx?page=16619

shedboy94

comping_cat wrote: »

Am i correct in saying that this year (2012/13) is still the tax credit system, and its next year (13/14) that the UC system starts?

I would also be interested to see if for self employed people, its income before or after tax they consider!

It's taxable income regardless if you are S/E or employed

S/E - Income - business expenses = Net Profit.......Tax is then deducted from the Net Profit. It is the Net profit (before Tax) that is the declarable income.

Dontknowanymore

Can someone tell me, does this mean it's all paid at once?
I'm a lone parent on income support, going to college in Sept, say I made a new claim after then, instead of getting 2 or 3 lots of money does it all get paid at once?

kkkssshhh

Can any body expalin what count as saving in the mean tested benifits.
we never claimed anything apart from CTC and WTC as the OH had a job and i have self employed business.
my question is Does the business stock count as saving in the mean tested benifits as i assume it would be in UC?
I sell on ebay and have an income of around 12-15K with the turnover of around £200K. most of our profit get spent but usually have around 20K items in stock. Does that mean we will not be even eligible to claim universal credit (currently we are able to claim child tax credit)
thanks

Angel747

Thank you for the replies, hopefully i will be earning more or i wont be claiming the CTC/WTC equivalent when it changes to UC (youngest child almost 14, so if i have until 2016/17 before changing she will almost be out of college).

HappyMJ

shedboy94 wrote: »

So what is it then.......do you work or don't you? I don't understand how you can "generally don't work", but then in the same sentence say you work 30hpw. What do you do for 30hpw that you only earn £40 from???

Both less not working than working...I do a bit of everything really. Mystery shopping, general labourer, computer support. I consider myself a jobseeker but I do too much work to be entitled to jobseekers allowance...i.e more than 16 but as I can include travel and administration in the 30 hours then I admit I do stretch out some jobs to make sure I have at least 30 hours each week. The £40 is profit. My charge out rate is at least £8 per hour and I have general expenses (computer, mobile and broadband) plus travel at 45 pence a mile reducing the profit to £40 a week. I probably have about 20-25 charged out hours each week on average the rest is travel and admin. I personally think working tax credits should be abolished and minimum wages increased so that employers pay the real cost of labour and the tax payer does not. It would get rid of payments to self employed people who are well known for under reporting income.