Benefit cap

Benefit Cap

Welfare Reform Factsheet 2 - The Benefit Cap

From April 2013 there will be a cap (a maximum limit) on the total benefit that can be claimed by people of working age. People who are old enough to qualify for pension credit will not be affected. Certain households will be exempt from the cap (see below) depending on what benefits have been awarded.

Which households are exempt from the cap?

Just like the bedroom tax (see above) the benefit cap won’t apply to your household if you have (or your partner has) reached pension credit age (see How can I tell if pension credit age will be reached by April 2013?” above). There will also be exemption where you, your partner or any children you are responsible for, qualify for Working Tax Credit, or have been awarded any of the following benefits:

  • Disability Living Allowance (DLA)
  • Personal Independence Payment (from June 2013)
  • Attendance Allowance
  • Employment and Support Allowance (ESA) with a support component
  • Industrial Injuries Benefits
  • War disablement pension or payments under the Armed Forces Compensation Scheme
  • War Widow’s or War Widower’s pension

Grace period: It is the government’s intention that, if you have been in employment for 52 weeks or more when you claim benefit and you lost your job through no fault of your own, you may be exempt from the benefit cap for up to 9 months.  This will be called a grace period.

Which benefits count towards the cap?

The following benefits all count when working out if the total amount exceeds the cap: 

  • Bereavement Allowance
  • Carer’s Allowance
  • Child Benefit
  • Child Tax Credit
  • Employment and Support Allowance except where the Support Component has been awarded
  • Guardian’s Allowance
  • Housing Benefit
  • Incapacity Benefit
  • Income Support
  • Jobseeker’s Allowance Maternity Allowance
  • Severe Disablement Allowance 
  • Widowed Parent’s Allowance
  • Widows Mother’s allowance
  • Widow’s Pension
  • Widow’s Pension (age-related)

How much is the benefit cap?

It is expected that the benefit cap will be:

£500 a week – for a couple (with or without children) or a lone parent

£350 a week – for a single person with no children in the same household

How will the cap be put into effect?

If the total of benefits that count claimed by your household is more than the cap then (unless you are exempt) your housing benefit will be reduced to bring the total benefit down to the amount of the cap.

Example                                

Leone is a lone parent age 42, who lives with her 6 children, all under age 16.  She lives in a 5 bedroom house with a rent of £90.38 per week.  She claims income support.  Assuming that she is not affected by the bedroom tax, Leone’s weekly income from benefits (before the benefit cap is applied) would be as follows:

Income support                                   £71.00

Child benefit                                        £87.30

Child tax credit                                    £319.99

Housing benefit                                   £90.38

Total                                                   £568.67

None of Leone’s benefits comes under an exempt category, and they all count towards the total for the benefit cap.  Her total benefit income estimated above would be £568.67, which is £68.67 more than £500, the benefit cap for a lone parent.  This means, under the benefit cap rules, Leone’s weekly housing benefit would be reduced by £68.67, to £21.71 per week (Please note – the figures above are estimates only, based on benefit rates at time of printing, which may be subject to change).

Possible solutions...

With welfare rights advice, Leone might be able to claim one of the benefits that would make her exempt from the benefit cap. For example, if she started work for at least 16 hours per week, she would qualify for working tax credit and so her household would be exempt from the cap. If Leone or any one of her children became entitled to DLA, then the household would be exempt from the cap. If exemption could not be achieved, Leone could ask to be considered for a discretionary housing payment from the Council to top up her housing benefit.