The Chancellor reduced the Universal Credit taper rate in his Autumn Budget, allowing claimants to keep more of their benefits as their earnings rise – but the boost will only benefit those in work
Thousands more struggling single parent families will be able to apply for Universal Credit for the first time from this month.
Around 600,000 more families will be entitled to the support under a shake-up to the taper rate unveiled in the Budget last month.
That includes single parents and one-earner families that earn just over £50,000 a year and are financially vulnerable.
Last month, the taper rate was cut from 63% to 55%.
That means that for every extra pound earned the benefit payment will now be reduced by 55p, an extra 8p per pound in the pockets of claimants.
The Institute for Fiscal Studies (IFS) said a total of seven million households will be entitled to Universal Credit after Mr Sunak’s changes.
Although the benefit predominantly exists for the low paid and those not in work, Universal Credit can, in fact, be claimed by some people higher up the income scale.
Higher rate tax is paid at 40% by those who earn between around £50,000 and £150,000.
A single parent with two children and monthly rent of £750 can earn just under £52,000 before losing the ability to claim Universal Credit, up from £44,500 before the Budget, the IFS said.
A couple with just one earner in the same circumstances can make almost £59,000 in income before being cut off, a rise from £49,300 previously.
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The average salary for a full-time employee in the UK is £31,285.
Tom Waters, economist at the IFS, said: “The Budget reforms extend that reach further up the income distribution, by slowing the speed that the benefit is withdrawn as earnings increase.
“It will now be the case that three in every seven families with children will be entitled to at least some Universal Credit at any one time, and many more over the course of a lifetime.”
James Heywood, head of welfare at the Centre for Policy Studies, said the changes would mean many claimants that are in work will be better off despite the end to the £20 uplift.
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But those out of work – including disabled claimants – will not benefit as the taper rate only supports those in employment.
“A lot of the people who will be the main beneficiaries of these changes are not the very poorest, they are people in work on relatively low earnings – for example, people earning £20,000 a year or so,” he said.
“Those lower middle class families are the sorts of people that will be particularly benefiting from the Universal Credit changes that they announced at the Budget. In that sense, I think you probably could argue that it is a very Red Wall-friendly policy.”
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