Welfare Tax Credits

(asked on 23rd March 2020) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will suspend the tax credit income disregard for reductions in earnings for the financial year 2020-21 to ensure that where earnings fall households' tax credit entitlement takes full account of that loss.


Answered by
Steve Barclay Portrait
Steve Barclay
Secretary of State for Environment, Food and Rural Affairs
This question was answered on 21st April 2020

This Government is doing whatever it can to ensure that individuals, families and businesses are supported during the Covid-19 outbreak.

The Government recognises that Tax Credits were introduced in the early 2000s and no longer fully reflect the world of work for many people. That is one of the reasons why we are introducing Universal Credit. Universal Credit replaces Tax Credits and several other legacy benefits, to provide a single system of means-tested support for working age people. Universal Credit is assessed and paid monthly and is based on claimants’ actual earnings in the month, rather than their annual income. As HMRC and DWP are experiencing significant increased demand, the Government has chosen to prioritise the safety and stability of the benefits system overall. That is why we have introduced measures that can be operationalised as quickly and safely as possible in order to provide support to those who need it most.

Suspending the income disregard in Working Tax Credit (WTC) would not benefit claimants on the lowest incomes who are already in receipt of the maximum support available through WTC.

This Government has taken additional steps to support those affected by Covid-19 and has announced a wide-ranging package of measures to support individuals, families and businesses affected by Covid-19. These measures include:

  • Making Statutory Sick Pay (SSP) available for individuals diagnosed with Covid-19 or those unable to work because they are self-isolating in line with Government guidance. This is in addition to the change announced by the Prime Minister that SSP will be payable from day 1 instead of day 4 for affected individuals.
  • Increasing the standard allowance in Universal Credit and the basic element of Working Tax Credit by up to £20 per week
  • A further temporary relaxation of earnings rules for self-employed Universal Credit claimants
  • Increasing the Local Housing Allowance for Universal Credit and Housing Benefit claimants to the 30th percentile of market rents.
  • Introducing the Coronavirus Job Retention Scheme to help firms continue to keep people in employment. Businesses can put workers on temporary leave and the Government will pay them cash grants to cover 80% of their wages up to a cap of £2,500, providing they keep the worker employed.

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