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What is the new benefit cap and how will it affect you?

Posted: Mon 07 Nov 2016

Today, the Government is introducing a new benefit cap which could see families losing more than £100 a week.

The cap sets out the maximum amount in benefits a household can receive each year.

At the moment, it is set at £26,000 – in line with the average national salary – but it is set to fall as of today being on Monday, 7 November 2016

Announcing the change in 2015, the former Chancellor George Osborne said: "We've got to have a welfare system that's fair for those who need it, but also fair for those who pay for it."

With thousands of families in receipt of some form of benefits in Hull, please see below a brief overview of how these changes will affect you.

What is the benefit cap?

The Department for Work and Pensions (DWP) says the cap is the maximum amount of benefits one household can receive. It means that when the cap is reduced today, the amount you receive for certain benefits may go down to make sure the total you get isn't more than the limit.

The cap was introduced in 2010 at a rate of £26,000 a year. Between its 2013 rollout and November 2015, 69,900 households lost some housing benefit due to the cap.

What's covered by it?

The benefits cap applies to people aged between 16 and 64. It groups together the benefits of a person, their partner, and any dependent children living in the same home under one 'cap'. But it doesn't count the benefits of grown-up children, friends or relatives who live with that person.

In 'mixed' households - if either partner works 16 hours or more - both are exempt from the cap. If one partner is aged 65 or over, they are exempt but their working-age partner is still included on their own.

The cap is the total amount your household can get from the following benefits:

Bereavement Allowance

Child Benefit

Child Tax Credit

Employment and Support Allowance (unless you receive the 'support' component)

Housing Benefit

Incapacity Benefit

Income Support

Jobseeker's Allowance

Maternity Allowance

Severe Disablement Allowance

Widowed Parent's Allowance (or Widowed Mother's Allowance or Widows Pension if you started getting it before 9 April 2001)

Universal Credit (unless you've had a work capability assessment and aren't fit for work)

Who isn't covered by it?

Most people who receive Carers Allowance or disability benefits will not be affected by the cap. You will also `be exempt from the cap if you receive one of the following benefits:

Armed Forces Compensation Scheme

Armed Forces Independence Payment

Attendance Allowance

Disability Living Allowance

Employment and Support Allowance (if you get the support component)

Industrial Injuries Benefits (and equivalent payments as part of a War Disablement Pension or the Armed Forces Compensation Scheme)

Personal Independence Payment

Universal Credit payment for 'limited capability for work and work-related activity'

War pensions

War Widow's or War Widower's Pension

I work but receive tax credits. Will it affect me?

The Government says the benefit cap does not apply to households where either you or your partner work and either one or both you is eligible to receive Working Tax Credit, or either one of you receives Universal Credit and your household income is more than £430 a month after tax and National Insurance.

What is the new cap?

Previously set at £26,000 a year – or £18,200 a year for households with no children – the benefit cap will be cut as of today.

It will now be set a different rates for people living in Greater London and those living outside the capital.

For people in Hull and East Yorkshire, the new cap will be:

£384.62 per week (£20,000 a year) if you're in a couple, whether your children live with you or not

£384.62 per week (£20,000 a year) if you're single and your children live with you

£257.69 per week (£13,400 a year) if you're single and you don't have children, or your children don't live with you

How do I know if it affects me?

The Government says it has written to most people who will be affected by the changes but the letters did not say how much they would lose. On the DWP website, there is a benefits cap calculator which can help you work out how it will affect you.

How many families will be affected?

Research by the Chartered Institute of Housing (CIH) says 116,000 families will be hit - both social and private renters - by up to £115 a week.

Most of them are two and three-children families, and 300,000 children are expected to be affected.

The DWP's own impact assessment guessed 120,000 households would be affected this year (2016/17).

But the DWP claims that figure is now 88,000 and it 'doesn't recognise' the CIH warning.

What is the reaction?

CIH chief executive Terrie Alafat said the new cap could put many families at risk of losing their homes.

"The results of our research are extremely worrying," she said.

"It shows that the reduction in total benefits is going to hit some of the most vulnerable families of all sizes across England, Scotland and Wales.

"These families will lose out when the cap comes into effect from November 7 and in many cases will straight away face a substantial gap between their rent and the help they receive to pay for their housing.

"Worryingly, our analysis shows many families could be one redundancy or a period of ill health away from being in this situation."

The Government defends the cap and says it makes an incentive for work.

What does the Government say?

A DWP spokesman said: "We are committed to helping people who are able to work into jobs and the benefit cap provides a clear incentive to move into employment for those who can.

"Anyone eligible for Working Tax Credits, Carers Allowance, and most disability benefits are exempt from the cap. "The benefit cap restores fairness to the system and the new limit will ensure the amount people on out-work-benefits can claim better reflects the circumstances of many working families in the country.

"Even with the new cap, households can still receive benefits up to the equivalent salary of £25,000, or £29,000 in London."

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