Credit where credit is due…. Guest Blog by Raworths Family Law
One year on from the introduction of Universal Credit in Harrogate, so where are we now?
What is Universal Credit?
Universal Credit is a payment system that was introduced in 2012 and has gradually been phased in across the UK with it being introduced in Harrogate during 2016.
Universal Credit is a new single benefit which has replaced most of the means-tested benefits with the biggest impact for families being the replacement of the Working and Child Tax Credit system that had been in place, largely unchanged, for many years.
The Universal Credit system continues to be means tested and many aspects of the assessment and payment remain unchanged however there are some changes which many separated or separating parents need to be aware of.
What is the impact of Universal Credit on the receipt of Child Maintenance?
None. Under both the Working and Child Tax Credit and the Universal Credit system, the payment received will not be affected by the receipt of child maintenance paid in accordance with the service guidelines.
What if you receive Spousal Maintenance?
This is one of the substantial changes that Universal Credit introduces. Under the previous system of tax credits any spousal maintenance payments were not considered when calculating a tax credit entitlement. However, the calculation of Universal Credit will now take into account any spousal maintenance you receive. Spousal maintenance will therefore lead to deduction on a pound for pound basis.
For example, if you are assessed as being due £700 of Universal Credit per month and you receive spousal maintenance of £400 per month, under the previous rules you would receive a total of £1,100 per month. Under the Universal Credit rules your spousal maintenance would be deducted and you would receive a total of £700 per month (£400 per month in maintenance and £300 for Universal Credit (£1,100 – £400).
This is a huge change from the previous system and can have a significant impact upon your family finances.
So, will this affect a financial settlement in divorce proceedings?
Yes, it could and it’s important that the changes that Universal Credit has brought about are considered in any settlement. It will need to be decided whether it is appropriate or affordable for your former spouse to bridge the gap between your income from all sources and your expenditure that has been created as a result of the introduction of Universal Credit.
In respect of financial settlements made prior to the introduction of Universal Credit, this may create further disputes as orders previously made (when consideration was given to what level of spousal maintenance would be paid), were calculated in accordance with an anticipated tax credit award. The amount of spousal maintenance may no longer be enough to make ends meet with Universal Credit being paid at a reduced rate.
Many people in Harrogate are only just starting to be affected by the introduction of Universal Credit and understanding what impact this new system will have. If you need any help or you are concerned, whether this be in respect of your current situation, a previous financial settlement or you are discussing a future separation agreement, please do not hesitate to contact us and we will happily discuss your options with you.