Personal Finance

Universal credit slashed by £1,040 per year: what should you do?

It’s more bad news for cash-strapped families as the government scraps the £20 per week Universal Credit boost. It will leave poorer households £1,040 worse off per year when the uplift ends on 6 October 2021. What should you do if you're affected?

The Universal Credit cut couldn’t come at a worse time for struggling families. There’s a cost of living crisis this winter with a surge in gas prices, food bills and housing costs. The extra payment was a lifeline to many households coping with lost wages and extra costs during the Covid 19 pandemic. Now experts are warning that more families will be plunged into poverty over the winter as they struggle to pay their bills.

Let’s take a look at why the boost is ending, how Universal Credit works, how to apply if you haven’t done so and how to cope with the £20 per week reduction.

Table of Contents

Why is the Universal Credit boost ending?

The £20 per week Universal Credit boost was introduced in March 2020. It was supposed to be a temporary extra payment to help families struggling with the financial impact of the Covid pandemic.

In March 2021 the Government extended the Universal Credit boost for another 6 months, when it became clear that the Covid crisis wasn’t over. But now, the extra payment is going for good. The Government have decided that they can’t afford it any longer and it will end as planned on 6 October 2021.

Am I entitled to Universal Credit?

Universal Credit is designed for adults on a low income and those who are struggling to get work.

You may be eligible for Universal Credit if:

  • you’re 18 or over and on a low income or out of work
  • you or your partner are under the State Pension age
  • you have savings of less than £16k
  • you’re between 16-18 and estranged from your parents
  • you live in the UK

You will not usually be eligible if you are between 18-21 and still in full time education.

The full eligibility rules are available on the Government website.

How much is Universal Credit?

The amount of Universal Credit varies depending on your circumstances. The standard amount for a couple over 25 years old is currently £597 but will be dropping to £510 per month from 6 October 2021. From 6 October, you will get a further £237 for your first two children and an additional £129 if you have a disabled child.

Standard Universal Credit PaymentsMonthly standard allowance before 6 October 2021Monthly standard allowance after boost ends 6 October 2021
Single and under 25£344£257.33
Single and 25 or over£411.51£324.84
In a couple and you’re both under 25£490.60 (for both people)£403.93 (for both people)
In a couple and either of you are 25 or over£596.58 (for both people)£509.91 (for both people)

There are extra payments available if you have childcare costs, need help with your rent or you have a disability that affects your ability to work.

The level of Universal Credit reduces by 63p for every extra £1 you earn. For example, if you earn an extra £1,000 your Universal Credit will reduce by £630.

You need to keep the Government updated on your level of earnings and any other changes to your circumstances like work hours or childcare costs as this could affect your payment amount.

How to apply for Universal Credit

You can apply Universal Credit by filling in an online form. You will need to have an email address and access to a mobile phone. If you don’t have time to do the application in one go, you will be able to save your progress and come back to it later.

Once your application is processed, you may be asked to attend an interview at the Job Centre to assess your ability to work.

If you need advice on Universal Credit or help filling in your form then you can get support from Citizens Advice.

How to cope with the £20 cut

If you are facing a £20 per week cut in Universal Credit, what should you do? Here are my top tips:

  • Make a budget. A good way to start reducing your household budget is by listing out every essential bill and working out how much money you have left. The remaining cash can be split between essentials like food and discretionary spending like hair cuts.
  • Save money on groceries. Look for ideas for food shopping on a really tight food budget. It’s often helpful to plan a few super cheap meals each week like eggs, beans and chips or lentil curry.
  • Cut down on non-essentials. You may be able to save money by cancelling subscriptions and buying cheaper Christmas presents.
  • Shop around for deals. You might find a better deal with a different mobile provider, energy provide or home insurer.
  • Avoid spending triggers. If you find yourself spending money online then put away your phone when you’re watching TV. If you love clothes shopping then try to avoid going into town or take cash with you so you’re not tempted to spend more than your budget.
  • Save up for emergencies. If you can manage to squeeze out some savings it will really help you to cover an unexpected bill. You’ll be able to dip into your savings pot rather than using an expensive credit card.
  • Get help with debt. If you are struggling with mounting debts then there are charities like Stepchange and Citizens Advice that can support you. An adviser can talk to you about your budget and help you come up with a plan to repay your debt.
Alice Guy

Alice Guy is a Suffolk-based business and personal finance writer. She trained with KPMG in London as a Chartered Accountant before working as a business analyst for Tesco Plc. Alice has personal experience surviving on a tight budget when she took time out to care for her young family. She loves to write about business finance, saving and investing—all the money stuff we were never taught at school.


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