BENEFITS EXPERT: How will the ‘benefit cap’ affect me?

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Who does the ‘benefit cap’ apply to and what will be the effect of the changes to it announced in the Budget?

Since April 2013 there has been a limit on how much some working-age people can receive in total from certain benefits.

This is called the ‘benefit cap’ and the limit someone can receive is £500 a week for couples and lone parents and £350 a week for childless single people.

Those affected have been people with big families, high rents or both.

The benefits in question are those paid for the adults in the family, benefits in respect of their children, plus Housing Benefit they get for rent.

The cap is applied by reducing their amount of Housing Benefit to bring their total benefits down to the level of the cap.

Some people are not subject to the cap if certain benefits are paid in respect of them, their partners or their children.

These include people with Disability Living Allowance, Industrial Injuries Benefits, Personal Independence Payments and those in the support group for Employment and Support Allowance.

Working people who get Working Tax Credit (WTC) are also exempt, as are those who work sufficient hours for WTC, but whose incomes are too high for them to qualify for it.

In the recent Budget, Chancellor George Osborne announced reductions in the level of the benefit cap.

From the expected date of April 2017 it will be £442 a week in London (£296 for singles) and £385 elsewhere (£258 for singles).

Under current rules, for example, a typical claimant affected by the benefit cap is an unemployed person with a partner, four children and £110 Housing Benefit towards the rent.

Jobseeker’s Allowance of £114.85, Child Benefit of £61.80, Child Tax Credit of £224.32 and Housing Benefit of £110 gives him total benefit before capping of £510.97.

So he loses £10.97 from his Housing Benefit to bring him down to the £500 cap level.

The proposed changes, however, will bring people in more commonplace situations within the scope of the benefit cap.

People with fewer children or smaller rents may now have their benefits cut by the cap.

For example, a non-working couple from outside London with two children and Housing Benefit of £125 towards the rent would be typical of those affected by the cap for the first time.

Jobseeker’s Allowance of £114.85, Child Benefit of £34.40, Child Tax Credit of £117.40 and £125 Housing Benefit gives them a total benefit income of £391.65.

Although they may not regard their situation as exceptional, this is £6.65 above the £385 benefit cap level and that is what they will lose.