Universal Credit and Salary Sacrifice

NedS

InAPickle76 said:

Really appreciate you taking the time to work all this out. I understand they deduct carers allowance pound for pound so will deduct the month's equivalent rate of CA in addition to salary deduction?

Yes, Carers Allowance will be deducted at the weekly rate x 52 / 12 to convert it to a monthly equivalent amount (£332.58/month)

Spoonie_Turtle

poppy12345 said:

Spoonie_Turtle said:

Okay, so you'll have the higher work allowance which means £631 ignored of your wages, so they'll deduct £972.95 (or £1100.45 if they use the higher, non salary-sacrifice amount).

Your UC award would be made up of*

Standard allowance couple £578.82
Child element x2 £315.00 + £269.58
Disabled child £456.89
Carer element £185.86

Total £1806.15

*Assumptions made: at least one child born before April 2017, as you said son claims PIP
Severely disabled child element for enhanced daily living component of PIP.  Otherwise the lower element is £146.31

That's assuming the son that claims PIP is still a qualifying young person.

Good point.  I did initially question it in my mind but remembered PIP can start at 16 so did assume since they mentioned their son in the context of the UC claim.  Still, they have all the info now to redo the calculation if any of the assumptions are wrong

NedS

Spoonie_Turtle said:

I don't understand how transitional protection etc. works so can't comment there.

As we have reasonably complete information in this case (even if it may be inaccurate*), perhaps I can use the information to provide an example calculation for illustrative purposes.

They start by looking at the legacy benefit entitlement on the day before the UC claim was made as reported by HMRC. In this case this is CTC based on 2 children, one of whom is severely disabled, and WTC based on net earnings of £2400/month

Legacy tax credits award £180/month

One important point to note here is the calculations are based on the earnings for tax credits that HMRC have reported to UC, and as we know this is based on last years taxable earnings, divided by 12 to give a monthly figure, and may not be what the claimant is currently earning.

Then DWP do a notional UC award calculation based on a like-for-like* comparison of the above circumstances; as per @Spoonie_Turtle's post above:

Standard allowance couple £578.82
Child element x2 £315.00 + £269.58
Disabled child £456.89
Carer element £185.86
Total UC entitlement before deductions £1806.15

This figure is then reduced by earnings of £2400/month (the figure used will be whatever HMRC used for their TC award, as DWP do not know their actual earnings at this point)

£2400 - £631 work allowance x 0.55 earnings taper = £972.95

Notional UC award: £1806.15 - £972.95 = £833.20/month

Transitional Protection = Legacy benefit award - Notional UC award

As the notional UC award is higher than the legacy benefit award in this case, there would be no transitional protection payment (the claimant is already notionally £653/month better off). The actual UC award is unlikely to be the same as the notional UC award as the notional UC award is based on average earnings from last tax year, not on how much the claimant(s) will earn this month.

 

The actual UC award would then be further reduced by £332.58 for the Carers Allowance that is already in payment separately.

Once the disabled child is removed from the claim next year, there would be a small UC entitlement of £106.73, but this would be reduced to nil by the carers allowance deduction, so if nothing else changes, the claim may as well end at that point.

[*] Please do not assume these figures to be accurate as they are for illustrative purposes only as the starting amounts may not be accurate.

[*] Like-for-like comparison: If, for example, the OP had told us they rent at £600/month but they were not claiming HB whilst on Tax Credits because they earned too much, the housing element would not be included in the notional UC award calculation to keep the comparison with legacy benefits like-for-like and meaningful, rather than comparing apples with oranges. OTOH, if they were claiming HB, then the housing element would be included to keep the comparison between legacy benefits and UC meaningful.

Spoonie_Turtle

Thanks for that NedS, that makes sense.  I guess it's not fully stuck before because every time I think I'm understanding, along comes someone posting about their UC award being a lot less!  *Using the income figures that HMRC have* might be what I was missing.

NedS

Spoonie_Turtle said:

Thanks for that NedS, that makes sense.  I guess it's not fully stuck before because every time I think I'm understanding, along comes someone posting about their UC award being a lot less!  *Using the income figures that HMRC have* might be what I was missing.

Yes, that's one of the big discrepancies for sure - people forget that their current TC award is likely based on last tax year's average earnings, and they may have changed jobs or otherwise had a large change in pay or some other change in circumstances that they maybe forgot to report to HMRC. And then the TP calculation is based on a notional award using old averaged earnings that may not accurately reflect the actual award.

InAPickle76

Thank you so so much everyone - this has been so helpful. I will await our first statement from UC in about 10 days to see what it says. I definitely now know the total we should receive from all elements and then the CA deducted. I guess the final amount will therefore now depend on what wage figure is reported to HMRC. Thanks again - really appreciate you all taking the time to reply and advise