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Universal credit and it's impact on separating couples

The universal credit scheme was introduced as a means of achieving the government’s objective to restructure the UK’s benefits system, making it simpler by reducing the considerable number of benefits available to claimants and replacing it with a “one stop shop”. It was considered that the changes to the system would promote greater efficiency and simplicity, helping claimants to better understand their entitlements.

What are the key differences to the current tax credit scheme?

It is important for new claimants to understand the way the new system of universal credit works. In particular, the scheme does not limit the number of hours claimants can work per week, however the monthly payment will gradually decrease as earnings increase (subject to the availability of a work allowance, in some cases; for example, if the claimant and/or their partner either has responsibility for a child and/or has limited capability for work).

Once universal credit has been claimed, any benefits it replaces will stop. In some cases, there is an additional amount of universal credit payable to ensure that claimants are not worse off when they stop getting tax credits.

What will be the impact upon separating couples?

Until universal credit has been rolled out nationwide and its impact has been fully assessed, it will be difficult for family lawyers to predict the payments that will be received after the changes have been implemented.

In the meantime, separating couples should be aware of one of the key differences between the current tax credit scheme and the new universal credit scheme. Under the current scheme, spousal maintenance and child maintenance payments are not considered as “income” for the tax credit calculations, therefore the spouse with the lower income will be entitled to their maximum tax credits, as well as spousal maintenance payments. By way of contrast, whilst child maintenance payments will continue to be excluded when calculating universal credit, spousal maintenance, together with all other unearned income, will be deducted pound for pound from any universal credit calculation. Inevitably, these factors will need to be considered when contemplating financial settlements in divorce proceedings, as the Court will need to review whether the amount of spousal maintenance is adequate, in light of the fact that the universal credit sum will decrease as a result.

Furthermore, there may be certain procedural issues where couples are receiving a single payment under the universal credit scheme. Following separation, the leaving spouse may encounter considerable delays in removing themselves from the joint claim and initiating their own claim. On the other hand, the spouse staying at the family home may also be disadvantaged in circumstances where the couple receives a single payment and the leaving spouse is responsible for managing the credit account. If matters have deteriorated to the extent that trust between the parties has completely broken down, this could theoretically lead to the staying spouse being financially prejudiced.

Is it a change for the better?

Notwithstanding concerns regarding the consequences of the new scheme for separating couples, the overarching aim is to help people in to work and encourage better management of budgets, which could arguably assist spouses seeking financial independence following separation. However, as the final stages of the gradual implementation period approach, the Department for Work and Pensions has faced criticism that the scheme is, in fact, causing debt and financial insecurity amongst vulnerable recipients, who for example are not in a position to wait up to seven weeks to receive their first payments and are therefore left financially exposed. Whether or not this argument is well-founded will remain to be determined until the scheme has been rolled out in its entirety.

CONTACT MARILYN

If you would like more information or advice relating to this article or a Family law matter, please do not hesitate to contact Marilyn Bell on 01727 798009. 

© SA LAW 2017

Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them alone. You are recommended to obtain specific advice in respect of individual cases.

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