Yet another TC to UC transition

jadex

Apologies for starting yet another TC to UC transition thread... but if anyone knowledgeable could help to solve a few riddles then it would be greatly appreciated.

Background: transition notice received in February; self-employed couple, kids already left the nest.

1. When does application start? When UC account is first registered or is there some final 'Submit' button after answering multiple questions, completing required tasks, etc. which could take a few days? 

2. Is it better to apply now or after 6th April? Or it doesn't matter?

3. Transitional protection is for 12 months whatever the circumstances? Or is changing the address a significant change which terminate TP? Landlord is selling this year, but not yet.

4. About savings: from other threads it seams that savings above the £16k threshold do not make anyone ineligible for the first year.
Question: will still every started £250 above £6k reduce UC by £4.35 or no?
So, £12k (i.e. 24x £250 above the threshold) will reduce UC by £104.40?
Does reduction stop at £16k or is going to actual level? For instance, if savings are £20k then reduction is £243.60? (£20k-£6k=£14k, i.e. 56 x £250 -> 56 x £4.35 = £243.60 per month)

5. What does constitute savings? Whatever is in all current accounts, savings accounts, e-wallets, NS&I bonds? Or is it reduced by rent, bills, groceries, insurance?
What about business accounts? Are they part of personal capital / savings?

6. How UC treats "fake savings"?
By this I mean balance in savings account obtained by stoozing, 0% purchase credit card, loan.
For instance, if there is £10k in savings account obtained by transferring money from credit card in order to make about £500-£600 annual profit. Is this £10k treated as savings in the eyes of UC?
Because if it is and subsequently this £10k reduces UC entitlement by 40 x £4.35 = £174 per month, i.e.by £2k annually then there is no point of doing stoozing or any other such techniques involving capital. Better then just pay off credit card before applying for UC?

7. Is money held for purpose of moving to another rental property considered as savings or can be disregarded? The only way to secure another place is to pay for 6 months upfront (plus 1.5 month deposit) which is more than a handful of grands... 

8. Income.
Minimum Income Floor: should self-employed person make £10.42 (current minimum wage) x 35 hours per week (full time) x 52 weeks = £18,964.40 per annum?
If so, does that mean that self-employed person is supposed to work for  the whole year with no breaks or holidays? And bank holidays are also disregarded for UC calculations?

Is this thoroughly thought through by lawmakers? Many S/E people work more than 35 hours but it doesn't mean that every hour is paid for. There is a travel time (not "commuting" but between the jobs), there is a marketing time, there is an admin time, there is a learning time, and so on...
And although income might itself even out on annual basis then often S/E people do not have control over when getting paid - some clients can pay on the spot, others pay invoice within a week, others after 3 weeks, some are late...

9. Accounting
If AP differs from 1st to last day of the month, does it mean that there is a requirement to do "double" accounting? One set of monthly accounts for tax and another set for UC purposes?

Thanks in advance for any help

NedS

Replying inline in bold for my convenience

jadex said:

Apologies for starting yet another TC to UC transition thread... but if anyone knowledgeable could help to solve a few riddles then it would be greatly appreciated.

Background: transition notice received in February; self-employed couple, kids already left the nest.

1. When does application start? When UC account is first registered or is there some final 'Submit' button after answering multiple questions, completing required tasks, etc. which could take a few days? 

From the date you complete the online application and click submit

2. Is it better to apply now or after 6th April? Or it doesn't matter?

Define better? As you are self employed, you may want to apply at the end of the tax year to keep this tax year simple? If you are PAYE paid/employed, you may want to keep your application date away from your regular pay date.

3. Transitional protection is for 12 months whatever the circumstances? Or is changing the address a significant change which terminate TP? Landlord is selling this year, but not yet.

No, transitional protection can end completely or change based on circumstances. Changes to your rent may cause the TP payment element to change. If your rent goes up, the TP amount would reduce by the same amount to keep the overall UC award the same.

4. About savings: from other threads it seams that savings above the £16k threshold do not make anyone ineligible for the first year.
Question: will still every started £250 above £6k reduce UC by £4.35 or no?
So, £12k (i.e. 24x £250 above the threshold) will reduce UC by £104.40?
Does reduction stop at £16k or is going to actual level? For instance, if savings are £20k then reduction is £243.60? (£20k-£6k=£14k, i.e. 56 x £250 -> 56 x £4.35 = £243.60 per month)

Savings above £16k are disregarded for 12 months. This means, if you have savings over £16k, you can receive UC for 12 months where you would otherwise be ineligible without transitional protection. There is only a deduction for capital between £6 and £16k, everything over £16k is disregarded, therefore the maximum deduction for capital is £174/month even if you have £1M in capital.

5. What does constitute savings? Whatever is in all current accounts, savings accounts, e-wallets, NS&I bonds? Or is it reduced by rent, bills, groceries, insurance?
What about business accounts? Are they part of personal capital / savings?

Essentially, everything - balances of all accounts, assets, savings etc. There is no reduction for outgoings. You would declare everything, and a DM will decide what can be disregarded. Business assets essential for the running of the business are disregarded in full.

6. How UC treats "fake savings"?
By this I mean balance in savings account obtained by stoozing, 0% purchase credit card, loan.
For instance, if there is £10k in savings account obtained by transferring money from credit card in order to make about £500-£600 annual profit. Is this £10k treated as savings in the eyes of UC?
Because if it is and subsequently this £10k reduces UC entitlement by 40 x £4.35 = £174 per month, i.e.by £2k annually then there is no point of doing stoozing or any other such techniques involving capital. Better then just pay off credit card before applying for UC?

These would be included as capital - if it's sat in your account, it's capital. Generally it is better to clear your debts - UC and stoozing are not good bedfellows.

7. Is money held for purpose of moving to another rental property considered as savings or can be disregarded? The only way to secure another place is to pay for 6 months upfront (plus 1.5 month deposit) which is more than a handful of grands... 

Unfortunately there are no grounds for this to be disregarded, so would be fully taken into account as capital.

8. Income.
Minimum Income Floor: should self-employed person make £10.42 (current minimum wage) x 35 hours per week (full time) x 52 weeks = £18,964.40 per annum?
If so, does that mean that self-employed person is supposed to work for  the whole year with no breaks or holidays? And bank holidays are also disregarded for UC calculations?

The Minimum Income Floor (MIF) is calculated as you state, with deductions for tax and NI as self-employed rates. The net figure is £1410.89/month based on 35h. As the MIF is a monetary amount, it is not really relevant how many hours you work - you may work 10h/week and exceed the MIF if you charge a high hourly rate. There is no concept of holidays on UC - as a self-employed person you get to choose your own hours and rates of pay.

Is this thoroughly thought through by lawmakers? Many S/E people work more than 35 hours but it doesn't mean that every hour is paid for. There is a travel time (not "commuting" but between the jobs), there is a marketing time, there is an admin time, there is a learning time, and so on...
And although income might itself even out on annual basis then often S/E people do not have control over when getting paid - some clients can pay on the spot, others pay invoice within a week, others after 3 weeks, some are late...

9. Accounting
If AP differs from 1st to last day of the month, does it mean that there is a requirement to do "double" accounting? One set of monthly accounts for tax and another set for UC purposes?

UC works on a cash accounting basis (cash in, cash out on the date the transaction occurs) for the UC month - the date your claim starts, ending the day before in the following month. If this is going to be an issue for you, maybe make your UC claim on the 1st of the month then you only need to do your accounting once. If anything, UC may help with your accounting process, as you will have 12 sets of monthly accounts already done at the end of the tax year, so should make it relatively simple to amalgamate and submit to HMRC?

Thanks in advance for any help

peteuk

Just to add, with transition to UC you will be invited to attend a self employment meeting with your work coach.  Once they have you registered as self employed you will need to input your income on the last day of your assessment period, for that assessment period.   

You will also be given a years set up period, so the MIF will not apply for the first year of your transition. 

Yamor

Some added comments in italics:

NedS said:

Replying inline in bold for my convenience

jadex said:

Apologies for starting yet another TC to UC transition thread... but if anyone knowledgeable could help to solve a few riddles then it would be greatly appreciated.

Background: transition notice received in February; self-employed couple, kids already left the nest.

1. When does application start? When UC account is first registered or is there some final 'Submit' button after answering multiple questions, completing required tasks, etc. which could take a few days? 

From the date you complete the online application and click submit

2. Is it better to apply now or after 6th April? Or it doesn't matter?

Define better? As you are self employed, you may want to apply at the end of the tax year to keep this tax year simple? If you are PAYE paid/employed, you may want to keep your application date away from your regular pay date.

If you will be relying on the transitional capital disregard, then better to wait as long as possible before claiming, as you will only get 12 months from when you claim.
Even if you will not need the transitional capital disregard, but the MIF will affect you, then that would also be a reason to claim as late as possible.
Finally, if you will be entitled to a transitional element, then it is better to delay claiming until 8th April.

3. Transitional protection is for 12 months whatever the circumstances? Or is changing the address a significant change which terminate TP? Landlord is selling this year, but not yet.

No, transitional protection can end completely or change based on circumstances. Changes to your rent may cause the TP payment element to change. If your rent goes up, the TP amount would reduce by the same amount to keep the overall UC award the same.

As you mention 12 months, I assume you are referring to the transitional capital disregard. This will not end due to a change of address, but could end due to other changes of circumstances.

4. About savings: from other threads it seams that savings above the £16k threshold do not make anyone ineligible for the first year.
Question: will still every started £250 above £6k reduce UC by £4.35 or no?
So, £12k (i.e. 24x £250 above the threshold) will reduce UC by £104.40?
Does reduction stop at £16k or is going to actual level? For instance, if savings are £20k then reduction is £243.60? (£20k-£6k=£14k, i.e. 56 x £250 -> 56 x £4.35 = £243.60 per month)

Savings above £16k are disregarded for 12 months. This means, if you have savings over £16k, you can receive UC for 12 months where you would otherwise be ineligible without transitional protection. There is only a deduction for capital between £6 and £16k, everything over £16k is disregarded, therefore the maximum deduction for capital is £174/month even if you have £1M in capital.

5. What does constitute savings? Whatever is in all current accounts, savings accounts, e-wallets, NS&I bonds? Or is it reduced by rent, bills, groceries, insurance?
What about business accounts? Are they part of personal capital / savings?

Essentially, everything - balances of all accounts, assets, savings etc. There is no reduction for outgoings. You would declare everything, and a DM will decide what can be disregarded. Business assets essential for the running of the business are disregarded in full.

A reasonable amount of money in a business account needed for business cash flow, e.g., to pay bills, or to pay the tax bill, can be disregarded as a business asset.

6. How UC treats "fake savings"?
By this I mean balance in savings account obtained by stoozing, 0% purchase credit card, loan.
For instance, if there is £10k in savings account obtained by transferring money from credit card in order to make about £500-£600 annual profit. Is this £10k treated as savings in the eyes of UC?
Because if it is and subsequently this £10k reduces UC entitlement by 40 x £4.35 = £174 per month, i.e.by £2k annually then there is no point of doing stoozing or any other such techniques involving capital. Better then just pay off credit card before applying for UC?

These would be included as capital - if it's sat in your account, it's capital. Generally it is better to clear your debts - UC and stoozing are not good bedfellows.

7. Is money held for purpose of moving to another rental property considered as savings or can be disregarded? The only way to secure another place is to pay for 6 months upfront (plus 1.5 month deposit) which is more than a handful of grands... 

Unfortunately there are no grounds for this to be disregarded, so would be fully taken into account as capital.

8. Income.
Minimum Income Floor: should self-employed person make £10.42 (current minimum wage) x 35 hours per week (full time) x 52 weeks = £18,964.40 per annum?
If so, does that mean that self-employed person is supposed to work for  the whole year with no breaks or holidays? And bank holidays are also disregarded for UC calculations?

The Minimum Income Floor (MIF) is calculated as you state, with deductions for tax and NI as self-employed rates. The net figure is £1410.89/month based on 35h. As the MIF is a monetary amount, it is not really relevant how many hours you work - you may work 10h/week and exceed the MIF if you charge a high hourly rate. There is no concept of holidays on UC - as a self-employed person you get to choose your own hours and rates of pay.

Is this thoroughly thought through by lawmakers? Many S/E people work more than 35 hours but it doesn't mean that every hour is paid for. There is a travel time (not "commuting" but between the jobs), there is a marketing time, there is an admin time, there is a learning time, and so on...
And although income might itself even out on annual basis then often S/E people do not have control over when getting paid - some clients can pay on the spot, others pay invoice within a week, others after 3 weeks, some are late...

9. Accounting
If AP differs from 1st to last day of the month, does it mean that there is a requirement to do "double" accounting? One set of monthly accounts for tax and another set for UC purposes?

UC works on a cash accounting basis (cash in, cash out on the date the transaction occurs) for the UC month - the date your claim starts, ending the day before in the following month. If this is going to be an issue for you, maybe make your UC claim on the 1st of the month then you only need to do your accounting once. If anything, UC may help with your accounting process, as you will have 12 sets of monthly accounts already done at the end of the tax year, so should make it relatively simple to amalgamate and submit to HMRC?

Thanks in advance for any help

jadex

Thank you all very much for your replies.
It really cleared a lot of confusions.

Jyana

One query about savings which I haven't seen mentioned so far I think when it comes to the TC to UC change and have been wondering about. Does anyone know what happens with the CoL payments, do you still get the disregard status transferred when there's a change or break in benefit or do you then lose it?

I am assuming that it transfers as I'm sure they used the term indefinite, which they also used for special funds like Grenfell, but you never can tell.

poppy12345

Jyana said:

One query about savings which I haven't seen mentioned so far I think when it comes to the TC to UC change and have been wondering about. Does anyone know what happens with the CoL payments, do you still get the disregard status transferred when there's a change or break in benefit or do you then lose it?

I am assuming that it transfers as I'm sure they used the term indefinite, which they also used for special funds like Grenfell, but you never can tell.

Yes they are disregarded indefinitely, regardless of which benefits you're claiming. 

Jyana

Thank you for confirming poppy. I thought that would be the answer but it's good to have it confirmed.

ElwoodBlues

NedS said:

Replying inline in bold for my convenience

jadex said:

5. What does constitute savings? Whatever is in all current accounts, savings accounts, e-wallets, NS&I bonds? Or is it reduced by rent, bills, groceries, insurance?
What about business accounts? Are they part of personal capital / savings?

Essentially, everything - balances of all accounts, assets, savings etc. There is no reduction for outgoings. You would declare everything, and a DM will decide what can be disregarded. Business assets essential for the running of the business are disregarded in full.

Also bear in mind that income (inc UC payment) from the previous month doesn't become classed as capital until the end of the following AP, so you can deduct that if you spend it all by then.

Have you checked your entitlement on an independent benefits calculator? I'm not sure you'll be entitled to anything based on what you've said about your circumstances?

jadex

ElwoodBlues said:

NedS said:

Replying inline in bold for my convenience

jadex said:

5. What does constitute savings? Whatever is in all current accounts, savings accounts, e-wallets, NS&I bonds? Or is it reduced by rent, bills, groceries, insurance?
What about business accounts? Are they part of personal capital / savings?

Essentially, everything - balances of all accounts, assets, savings etc. There is no reduction for outgoings. You would declare everything, and a DM will decide what can be disregarded. Business assets essential for the running of the business are disregarded in full.

Also bear in mind that income (inc UC payment) from the previous month doesn't become classed as capital until the end of the following AP, so you can deduct that if you spend it all by then.

Have you checked your entitlement on an independent benefits calculator? I'm not sure you'll be entitled to anything based on what you've said about your circumstances?

Ordinarily would not be entitled to anything due to savings (which are not really a savings...).
However, because it would be a managed transition then there is entitlement to some small help. Quirk in the system, I suppose, as it looks like there is an entitlement to housing element whereas it wasn't any to housing benefit.

peteuk

jadex said

Ordinarily would not be entitled to anything due to savings (which are not really a savings...).
However, because it would be a managed transition then there is entitlement to some small help. Quirk in the system, I suppose, as it looks like there is an entitlement to housing element whereas it wasn't any to housing benefit.

You have to realise it’s not just savings it’s capital.  So can include second homes, bonds, bitcoins, ect.