Universal credit / Variation of Maintenance

Tue 15th Sep 2015

Are you at risk of a variation of maintenance application?

Major changes have been made by the Government to the eligibility criteria for tax credits (along with various other benefits) for those who are receiving spousal maintenance as part of their divorce settlement. The introduction of Universal Credit means that a person’s eligibility for certain State benefits will be reduced, pound for pound, by any sum received in spousal maintenance. This change is likely to be met with trepidation by those who are on the paying end of a maintenance order. This is because a former partner may suddenly suffer a reduction in their overall income, prompting him/her to make an application to the Court for an upwards variation in maintenance.

What is Universal Credit?

This is a new type of State benefit which consolidates a number of other benefits, so that the payment system is made simple. The benefits which are being rolled up into this one benefit are Working Tax Credits, Child Tax Credits, Jobseeker’s Allowance, Housing Benefit, Employment and Support Allowance and Income Support.

How do you know if you will be affected?

There is little publicly available information on Universal Credit at the moment, but we do know that it will be rolled out nationwide by 2017. It has already been introduced in certain areas, and if you are in receipt of the benefits above then you are likely to receive notification that you will need to apply for Universal Credit when it comes into effect in your local area.

What do you need to know if you are getting divorced?

If you are reliant on State benefits such as tax credits, this will usually be taken into account when assessing your overall income needs upon divorce. It is key to ensure that your solicitor is aware of any reduction in benefits so that he/she can negotiate a higher maintenance payment from your spouse.

What do you need to do if you are paying maintenance to a former spouse?

For those of you who are already divorced, you need to be aware that you may be faced with an application to Court by your former partner for an increase in the monthly sum payable, on the basis that they have lost part of their overall income due to Universal Credit.

Various considerations are important when negotiating a variation of maintenance, for example, points related to earning capacity, and it is therefore important to seek specialist advice before agreeing to any increase in maintenance.

Although there is currently a clear need for more information on Universal Credit, it is hoped that this will become available as this new benefit is gradually introduced around the country. At the moment however, we are required to plan as far as we are able to make sure that a financially weaker party has enough money to meet his/her needs, and that those who currently pay maintenance are aware of any potential challenges they may face if Universal Credit impacts upon their former spouse.