Universal Credit changes: How much more of your income you can keep from December

Budget 2021: Sunak announces Universal Credit taper cut

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The changes to Universal Credit will come into force “no later than December 1”, the Chancellor stated. The taper rate, which Mr Sunak labelled a “hidden tax on work” will be reduced from 63p to 55p, meaning that those people on low income will get to keep more of their money.

It will be cut by eight percent “within weeks”.

The taper rate is the amount of benefit taken away from every £1 earned above the claimant’s work allowance – meaning claimants will now be able to keep an additional 8p per £1 of net income.

Additionally, the work allowance will be increased £500 a year.

The work allowance is the amount that households with children or a household member with limited capability for work, can earn before their Universal Credit payments are reduced.

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“It supports working families; it helps with the cost of living and it rewards work.”

“Nearly two million families will keep on average an extra £1,000 a year.

“Usually changes like this take effect at the beginning of a new tax year in April, but people are struggling now.”

The changes will be introduced “in time for Christmas,” by December 1.

Responding to the Budget, Labour’s shadow chancellor Rachel Reeves said: “never has a Chancellor asked the British people to pay so much for so little”.

She said: “After taking £6 billion out of the pockets of some of the poorest people in this country, he is expecting them to cheer today at being given £2 billion to compensate.”

This comes following the removal of the £20 a week Universal Credit uplift that helped struggling families through the pandemic.

According to the latest Government data, more than 5.8 million people were on Universal Credit as of September 9, 2021.

But the Treasury said the Budgets announcement of the taper rate cut and the work allowance threshold increase will only help 1.9 million people.

Furthermore, announced in the spending review was the rise to the national living wage.

From April 2022 it will increase by 6.6 percent to £9.50 an hour.

The Government is also investing an extra £170 million by 2024/25 into paying for childcare.

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