So much worse off when tax credit ends and UC starts

Cutgrass

I couldn't get my head around all this. So I asked a Member of this forum whether they would do a check on the benefit checker site. They very kindly agreed to this, and it looks like if my PHI is taken as income, I will have a UC payment of about £200. So now just waiting for the migration letter and to see what pot my PHI goes into. Thanks to everyone who has contributed to this thread. Also a really big thank you to the Member who help with the benefit   checker. Will be back when I get the letter if I need any further help. I haven't mentioned who the Member who helped in case they want to stay anonymous but they are welcome to post it if they like. 

Cutgrass

Have finally received the migration letter to claim uc from tax credits. I must admit so far it's been a total nightmare. As my income is from a PHI. They have used the amount as wages plus also used it for other income so I'm being hit double. I've been trying to sort it out for over a week now and no-one at U/C seems to understand or don't care to sort it out.  I've now missed the payment date. So hopefully this won't take to much longer to sort it out. 

v1ckyt

Cutgrass said:

Have finally received the migration letter to claim uc from tax credits. I must admit so far it's been a total nightmare. As my income is from a PHI. They have used the amount as wages plus also used it for other income so I'm being hit double. I've been trying to sort it out for over a week now and no-one at U/C seems to understand or don't care to sort it out.  I've now missed the payment date. So hopefully this won't take to much longer to sort it out. 

My husband receives GIP (Group Income protection) and it is deducted from our UC entitlement £ for £ under the category of Other Income.
I can't understand how they can be using the amount in both the Income and Other Income categories, so keep going back to them. It can take a while to get a sensible or correct response via your journal, but you usually get there eventually. Best of luck. 

NedS

Yes, that is wrong. It's either Earned Income, and deducted as earnings at the 55p taper rate, or it's Unearned Income (other income) and deducted at the gross value pound for pound. It can only be deducted once.

Cutgrass

Hi all.

This morning U/C have finally come to there senses and removed the income in the other payment section. So they are using my PHI as a wage. So that's the first bit of good news. I'm still worse of by £356.

They say the transitional payment protection doesn't apply. I'm losing some because of savings. The rest as CTC didn't take my income into consideration. Does anyone know if that sounds correct. All the information I can find it says you will NOT be worse off when moving to U/C.So that's a complete lie. Any help will be very appreciated. 

kaMelo

Cutgrass said:

Hi all.

This morning U/C have finally come to there senses and removed the income in the other payment section. So they are using my PHI as a wage. So that's the first bit of good news. I'm still worse of by £356.

They say the transitional payment protection doesn't apply. I'm losing some because of savings. The rest as CTC didn't take my income into consideration. Does anyone know if that sounds correct. All the information I can find it says you will NOT be worse off when moving to U/C.So that's a complete lie. Any help will be very appreciated. 

As an employer provided health insurance it is correct to be classed as earned income. What I don't understand is, as it's classed as earned income, why it wasn't taken into account under tax credits,

Cutgrass

kaMelo said:

Cutgrass said:

Hi all.

This morning U/C have finally come to there senses and removed the income in the other payment section. So they are using my PHI as a wage. So that's the first bit of good news. I'm still worse of by £356.

They say the transitional payment protection doesn't apply. I'm losing some because of savings. The rest as CTC didn't take my income into consideration. Does anyone know if that sounds correct. All the information I can find it says you will NOT be worse off when moving to U/C.So that's a complete lie. Any help will be very appreciated. 

As an employer provided health insurance it is correct to be classed as earned income. What I don't understand is, as it's classed as earned income, why it wasn't taken into account under tax credits,

Yes I'm not to sure either. Every year we used to tell them we have a phi through my employer and we pay tax on it, but they still used to say we don't take that type of income into consideration for the purpose of tax credits. 

Newcad

Cutgrass said:

All the information I can find it says you will NOT be worse off when moving to U/C.So that's a complete lie.

Depends who is writing it.

The "official" way that MPs and the DWP word it us that Your benefit entitlement will not be less.

They conveniently forget to mention that your deductions from that entitlement may be very different (usually greater but not always) with UC, so although your benefit entitlement  remains the same your benefit payments may not be the same.

(Politician speak with forked tongue).

Yamor

I would actually say it slightly differently.

The aim of transitional protection is actually to ensure that UC entitlement after deductions for income should be at least as much as legacy benefit entitlement after deductions for income.

However, the issue they had was that you cannot easily compare like-with-like, as tax credits is based on a gross annual income figure, and is generally taken from the last tax year, whereas UC is based on current monthly net income.

The policy decision was therefore taken to calculate transitional protection based on a notional UC entitlement calculated using a net monthly equivalent of the gross annual income figure used by tax credits at the point of migration (for earned income). This ensures some degree of "like-with-like".

However, one result of this is that where the rules as to what counts as income differ between tax credits and UC, then the transitional protection can be wildly out.

andrewmp

Yamor said:

I would actually say it slightly differently.

The aim of transitional protection is actually to ensure that UC entitlement after deductions for income should be at least as much as legacy benefit entitlement after deductions for income.

However, the issue they had was that you cannot easily compare like-with-like, as tax credits is based on a gross annual income figure, and is generally taken from the last tax year, whereas UC is based on current monthly net income.

The policy decision was therefore taken to calculate transitional protection based on a notional UC entitlement calculated using a net monthly equivalent of the gross annual income figure used by tax credits at the point of migration (for earned income). This ensures some degree of "like-with-like".

However, one result of this is that where the rules as to what counts as income differ between tax credits and UC, then the transitional protection can be wildly out.

Transitional protection seems to deal with that too, sometimes at least. 

I know that, for example, student loan income is considered unearned income for UC, but is ignored for TC.

They do/should apply the transitional protection in respect of that.