Insurance

Changes coming to Universal Credit and National Insurance this month

Many incomes will change this month due to changes to National Insurance and Universal Credit. (PENNSYLVANIA)

There are a few key changes to Universal Credit and National Insurance this month.

Millions of Britons will see their benefits and contributions change in the days and weeks to come.

The United Kingdom remains in the grip of a cost of living crisismany people changing their drinking habits to deal with it.

Inflation – the rate at which prices rise – was recorded at 9.1% for May, its highest level since March 1982.

Britons are also facing soaring fuel prices – the average price of a liter of petrol on UK forecourts hit a new high of 191.5p on Sunday, while the average price of diesel was 199.0p per litre.

Watch: Cost of living crisis ‘has very little to do with Brexit’, says Rees-Mogg

A study published by the Institute for Fiscal Studies (IFS) on Monday found that 49% of children in single-parent families in the UK were living in relative poverty at the start of the coronavirus pandemic.

This percentage is equivalent to 1.5 million children. It is almost double that of children living in two-parent families (25%).

Many people will be watching their finances carefully this month as changes are made to Universal Credit and National Insurance.

What’s going on with Social Security?

National insurance are the contributions you pay to qualify for certain benefits and the state pension.

From tomorrow, Wednesday July 6, the earnings threshold for the payment of National Insurance (NIC) contributions will increase.

Chancellor Rishi Sunak in conversation with Shevaun Haviland, Chief Executive of the British Chambers of Commerce, during the annual British Chambers of Commerce World Conference at the QEII Centre, London.  Picture date: Thursday June 30, 2022.

Chancellor Rishi Sunak announced changes to Universal Credit and National Insurance earlier this year. (PENNSYLVANIA)

Until July 5, any employee earning more than £9,880 a year, or £190 a week, had to pay NICs. However, the threshold will be raised from Wednesday to £12,570 per year or £242 per week.

There is a government calculator for people to calculate how much their network cards will drop.

Someone on an annual salary of £25,000, for example, will pay £244 less a year because of the change.

Chancellor Rishi Sunak has said seven out of 10 people will pay less for National Insurance from this week.

How can the change in National Insurance affect Universal Credit?

Universal Credit is a monthly payment to help cover living expenses and is available to people with low incomes, or those who are unemployed or unable to work.

Universal Credit replaces other benefits and tax credits such as Child Tax Credit, Housing Benefit, Income Support and Income-Based Jobseeker’s Allowance.

The switch to National Insurance could mean that someone on Universal Credit pays less tax and has a higher take-home pay.

If you work, the amount of Universal Credit you receive decreases as you earn more.

EMBARGOED TO 0001 THURSDAY MAY 19 File photo dated 06/10/21 of a Universal Credit sign on a door of a job center plus, as a new $600 million plan to tackle benefits fraud and saving the taxpayer $2 billion over the next three years is to be unveiled by the government.  Date of issue: Thursday, May 19, 2022.

Households on Universal Credit are due to receive part of a payment this month to help with the rising cost of living. (PENNSYLVANIA)

Once you earn more than your working allowance, your Universal Credit payments are reduced at a constant rate, known as Reduced Universal Credit Revenue.

This reduction rate is currently 55%, after Sunak reduced it by 63% in its fall 2021 budget, meaning that for every pound you earn on top of your work allowance, your credit universal will be reduced by 55 pence. This amount is automatically deducted from your Universal Credit payment.

What else is going on with Universal Credit in July?

In May, Sunak unveiled a £15billion aid package to help UK households struggling with rising energy bills.

This included a £650 payment for more than eight million households on the lowest incomes.

These households will receive the first installment of this payment between July 14 and the end of the month.

It will be a payout of £326. The second payment of £324 will go to their bank accounts in the fall.

Payments will be made to households for the following benefits: universal credit, income-based jobseeker’s allowance, income-related employment and support allowance, income support, in-work tax credit, child tax and pension credit.

Watch: Rishi Sunak celebrates the arrival of the Universal Credit taper cut