Does Spousal Maintenance Affect Universal Credit?

24 February, 2015

Here are a few facts for anyone who is struggling to wade their way through the multiple help guides on the government website about the new Universal Credit (UC) state benefit that the government have been gradually rolling out recently.

UC is the new single benefit that will gradually replace most of the means-tested benefits including income-based Jobseeker’s Allowance, tax credits and Housing Benefit.

UC was introduced in 2013 in selected Jobcentre Plus areas known as ‘pathfinder areas’. Between February and April 2015 UC will be available in an additional 151 Jobcentre Plus areas and even more will be added from May 2015. The new areas are listed on the Gov.UK website. You can click here to see when your area will be affected.

To work out how much UC an individual is entitled to Jobcentre Plus needs to calculate how much income that individual receives. To do this they calculate both earned income and unearned income. Unearned income includes things like pensions, insurance payments, income from a trust and spousal maintenance payments.

Under the current benefits system of tax credits both spousal and child maintenance are disregarded when calculating entitlement. Whilst child maintenance will continue to be disregarded for Universal Credit, spousal maintenance (along with all other unearned income) will be deducted from your entitlement on a pound for pound basis.

This will become increasingly important when considering the amount of a financial settlement in divorce proceedings and may well mean the lower earning spouse will want to negotiate a higher maintenance figure to account for the loss of other benefits. The new system will also take into account an individual’s capital, such as savings. If your savings total more than £16,000 you will not be entitled to UC. However, there are certain types of ‘capital’ that are ignored for UC calculations such as personal possessions, business assets and your home if you own it.

You can see that not everyone will qualify for UC. For example if you are paying child maintenance you will not be able to claim UC and will instead have to claim one of the existing benefits.

Universal Credit has yet to reach my area of Tunbridge Wells, Kent so not many of my clients are currently affected. However, it looks likely to arrive before long, and it may well have a profound effect on separating couples.