Some people who apply for universal credit for the first time have found themselves in a worse situation after losing their existing benefits.
The system means that inherited benefits such as tax credits are stopped at the time of the request, even if the request is unsuccessful.
One applicant said that his family felt worse “at the click of a button”.
Universal credit applications exploded amid the coronavirus epidemic, with the next figures released on Tuesday.
People who have seen a sudden drop in their income, for various reasons, can apply for universal credit. In many cases, this will make them better off than they would have been otherwise.
However, some – usually those with savings – may find that they are not eligible for universal credit. Even so, payments for existing benefits are stopped as soon as the request is made.
- Coronavirus: “There is help if you ask for it”
- To be a deputy to claim universal credit
The problem existed before the coronavirus epidemic and is being challenged in court.
Now, with a wave of new requests from people who have lost their jobs or their income, activists are urging people to seek advice before applying. The government posted a video on social media on the rule.
“Left without support when we need it most”
Jon Fitzgerald, 52, is a freelance copywriter, and his wife Vicky had just started his interior design business. Their irregular income meant that they were already receiving around £ 400 a month in tax credits.
The work dried up as the coronavirus spread, so Mr. Fitzgerald started to apply for universal credit.
When the request was submitted, a stop notice was sent to cancel their tax credit, even if they did not complete the request when they realized they would fail.
But their savings meant that they were not eligible for universal credit and their old tax credits could not be reinstated.
“We have now lost well over half of our current monthly income at the push of a button,” said Fitzgerald.
“We followed the advice of the government in late March to ask for universal credit to help us [but] we were left without financial support at a time when we need it most. “
He said they could cope financially in the short term, but feared others in a similar situation would find it difficult.
“Although we agree at the moment, I must continue to remember that it is because we have frozen loans and cut our payments on public services. These allocations will end in July, ”he said.
“Who knows how long the fallout will be due to foreclosure in terms of work opportunities. “
Victoria Todd, head of the low-income tax reform group, said that this “important” issue had been “further highlighted by the current situation”.
Some 1.8 million people have applied for universal credit since the government advised people to stay at home because of the coronavirus, according to the latest figures.
The number is expected to be even higher when the updated data is released on Tuesday.
Todd pointed out that many people would be better off with universal credit, but said the rules on inherited benefits should be clarified on every occasion.
Where to look for help
Benefit calculators – check before making a claim
Turn2Us – a national charity offering benefit information, grants and support
Advice to citizens – help with benefits, consumer issues and other professional and financial matters
The advantages which are replaced by universal credit, and which thus cease when a request for universal credit is made, are the child tax credits, the labor tax credits, the housing allowances, the income-based job seeker, income support, and income-related employment support allowance.
Todd said it could represent “fairly large amounts” and that it would be threatened by an unsuccessful request for universal credit.
People who have savings could get caught because there was no limit to the amount a person holds in capital when they receive tax credits, but there was one with the universal credit, she said.
She urged anyone considering applying for universal credit to seek advice from charities such as Citizens Advice before starting a claim.
Secretary of Labor and Pensions Thérèse Coffey recently told MPs that she is “actively examining” this scenario to see what can be done.
In the Commons, welfare minister Will Quince said, “I am looking at the data and exploring the options.”
He said the department had worked with HM Revenue and Customs, which administers the tax credits, to encourage people to check their eligibility before applying and “make sure tax credit claimants understand that when they applied for the CU, their tax credits will end, and they cannot revert to the inherited benefits. “
In some very narrow situations, such as severely disabled people, you can reapply for a tax credit.