There are currently 5.6 million people across the UK claiming Universal Credit from the Department for Work and Pensions (DWP) to help with daily living costs as a result of unemployment or a low-income. Official figures show that 189,000 households in Scotland had an average of £60 deducted from their social security payments in just one month this year.
There are several reasons why the DWP could deduct money from a claimant’s monthly payment. These include repaying a DWP loan such as an advance given to new claimants to cover the five-week waiting period before their first Universal Credit payment is made.
Other reasons include paying back an overpayment and repaying debt for energy bills, rent or Council Tax. However, during these challenging financial times brought about by the cost of living crisis fuelled by soaring inflation and rising energy bills, many people might not be aware they may be able to reduce the amount they repay each month.
During a meeting before the parliamentary summer break, the former Secretary of State for Work and Pensions Dr Therese Coffey - now Deputy Prime Minister and Health Secretary - told a group of cross-party MPs: “If people are struggling, they can contact our management system in order to discuss what potential changes could be made. That is still open to them as opposed to being automatically deducted.”
Her response came after Conservative MP, Selaine Saxby, highlighted the average £78 monthly deduction, which can amount to as much as 20 per cent of an individual’s total benefit payment.
Dr Coffey explained how deductions have changed over recent years, she said: “We have put in place things like advances, which is a phasing of how people receive their benefits. We have extended that opportunity to potentially over two years, to have 25 payments instead of 24, but gradually we have been reducing the deduction cap.”
She also clarified that the deduction cap is now at 25 per cent.
However, when Ms Saxby asked if there is an “opportunity, given that there is this lag between the inflation figures reaching benefit claimants’ pockets, to have a pause or freeze on these deductions over that period”, the DWP boss steered her answer in the direction of having claimants reach out and ask for support.
She explained: “There is a tailored approach that is going to be taken by individuals to speak with the DWP about their own individual situation rather than having a blanket approach.
“It is important that the debt will still be there. You are just extending potentially the lifetime of it being recovered. I do not know if we should be making that decision for people on how they manage that debt relationship.”
Claimants can see deductions made to their Universal Credit payment on their monthly statement. To find your statement, sign into your online account and go to ‘Payments’ and on your statement, look for ‘What we take off - deductions’.
If you’re wondering what types of debt can be collected from your Universal Credit payment, we have outlined them below, however, full guidance can be found on the GOV.UK website here.
11 types of debt that result in a benefit deduction
1. Advance payments
This is your repayment of a Universal Credit advance.
2. Universal Credit overpayment
This is when you have been paid too much Universal Credit. To find out more about your overpayment, sign into your online Universal Credit account, go to your journal and look for a message about overpayments.
DWP guidance adds: “If you believe you have been overpaid but have not heard from Universal Credit, you need to contact Universal Credit to tell them about this.”
3. Benefit overpayment
This is when you have been paid too much for any benefit other than Universal Credit. It includes Tax Credits and Housing Benefit overpayments.
DWP warns that penalties can be added to a benefit overpayment.
It said: “If you believe you have been overpaid but have not heard from DWP, you must report it immediately. If not, you may be prosecuted or have to pay a penalty.”
If you have been overpaid, you will have a journal message or letter explaining what the overpayment is for.
4. Recoverable hardship payment
You can apply for a hardship payment if your Universal Credit payment has been reduced because of a fraud penalty or sanction.
You will need to pay this back once your fraud penalty or sanction has ended. DWP states that “when the amount you pay back has been agreed it cannot be changed”.
5. Budgeting and crisis loan repayment
This is your repayment of a budgeting or crisis loan. How much you pay back is agreed at the time you accept the loan.
Other debts you owe
These are known as third party deductions and are taken off your Universal Credit to pay other debts.
These include:
6. Utilities such as electricity, gas and water
7. Council Tax
8. Child maintenance
9. Rent
10. Service charges
11. Court fines
It’s important to be aware that only three third party deductions can be taken at any one time.
Universal Credit will send you a message in your online journal when a third party deduction starts.
How much will be taken off your Universal Credit payment?
Universal Credit calculates the amount taken from your payment at the end of every assessment period - one calendar month.
The amount taken off may change if your:
- Earnings change
- Other benefits change
DWP guidance explains: “It is not possible to tell you how much will be taken before this calculation takes place.
“Normally the most that can be taken from your payment is 25% of your Universal Credit Standard Allowance.”
This is the basic amount you are entitled to, before money for things like childcare and housing costs are added.
You may have more than 25% of your Standard Allowance taken off if you pay a ‘last resort deduction’.
A ‘last resort deduction’ helps to prevent you from being evicted or having your utilities cut off, it is paid directly to the person or organisation you owe money to.
What to do if you are struggling to repay your debt
If you’re struggling, you can ask for a financial hardship decision to reduce the amount of benefit debt you pay.
You may be considered for this if you have money taken from your Universal Credit for:
- Benefit debt
- Budgeting Loan and Crisis Loan repayment
- Advances
- Rent arrears - if they’re taken at a rate greater than 10% of the standard allowance
If a decision is made to reduce the amount you pay, it will be applied automatically to your next Universal Credit assessment period.
Find out who to contact about money taken off your Universal Credit payment on the GOV.UK website here.
To keep up to date with the cost of living crisis, join in the conversation on our Money Saving Scotland Facebook page here, or subscribe to our newsletter which goes out three times each week - sign up here.
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