What is Universal Credit?
Universal Credit was introduced by the government in 2012 and has already been introduced in many areas. Universal Credit is a new single benefit which will gradually replace most of the means-tested benefits. Universal Credit was introduced in selected Jobcentre Plus areas and even more will be added from May 2015. The new areas are listed on the gov.uk website. Click here to see when your area will be affected
What happens to other benefits?
As Universal Credit is intended to be a single benefit. This benefit will gradually replace most of the means-tested benefits including income-based Jobseeker’s Allowance, tax credits and Housing Benefit.
What is the impact of Universal Credit on the receipt of Child or Spousal Maintenance payments?
Under the current benefits system of tax credits, any child or spousal maintenance payments are not taken into account when calculating tax credit entitlement. However, whilst child maintenance will continue to be ignored, the calculation of Universal Credit will take into account any spousal maintenance a claimant is receiving. Spousal maintenance (along with all other unearned income) will be deducted in a pound for pound way from any Universal Credit calculation.
By way of example, if a claimant is receiving credit of £800 per month and spousal maintenance of £400 per month. Under the previous rules they would receive a total of £1,200 per month. However under the new Universal Credit rules the spousal maintenance would be deducted and the claimant would receive a total of £800 per month (£400 per month in maintenance and £400 for Universal Credit (£1,200 – £400).
How will this affect financial settlements in divorce proceedings?
It is now vital, given the expansion of Universal Credit that the impact of Universal Credit is considered in any settlement. The court, in considering any financial settlement upon separation, will need to review whether it is affordable for an ex-spouse to ‘bridge the gap’ created by Universal Credit, as outlined above.
In respect of financial settlements made prior to Universal Credit being introduced, this may create further disputes as orders would have been made when parties would have considered that any spousal maintenance payments would be supported by tax credits. The amount of spousal maintenance may now no longer be sufficient when Universal Credit is introduced.