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Budget June 2010 - benefits and tax credits

The Budget announced changes to payments and the way you claim Child Benefit, Child and Working Tax Credit, Disability Living Allowance and Housing Benefit. Child Benefit is frozen for three years. If you're a lone parent you're encouraged to return to work once your children are in school.

Child Benefit will be frozen

From April 2011, Child Benefit rates will stay the same for three years.

Changes to Child Tax Credit and Working Tax Credit

Budget 2010 announced several changes to Child and Working Tax Credits, including: 

  • raising the withdrawal rate (the amount taken off your tax credit entitlements depending on your income) to 41 per cent from 6.67 per cent
  • lowering the amount of your income not taken into account (income disregard) from £25,000 to £10,000 in 2011-12, and then to £5,000 from 2013-14 
  • increasing the rate at which tax credits are withdrawn as your household income goes up
  • removing the one-off payment for new workers over 50 from April 2012
  • introducing an income disregard of £2,500 for falls in income from April 2012
  • reducing the backdating of new claims and changes of circumstances from three months to one month from 2012-13
  • no Child Tax Credit from April 2011 for families earning more than £40,000 per year
  • aligning the income levels (thresholds) for the child and family elements
  • removing the baby element from April 2011
  • not introducing the £4 supplement for one and two year olds from April 2012 (as announced at the March 2010 Budget)
  • increasing the child element by £150 above inflation in April 2011 and £60 above inflation in April 2012
  • qualifying people aged 60 and over for Working Tax Credit from April 2011 if they work at least 16 hours a week (this was announced at the March 2010 Budget)

Parents’ benefits

The government will stop issuing the Health in Pregnancy Grant from 1 January 2011. Women who reach the 25th week of pregnancy before 1 January 2011 will still be entitled to the grant, providing they meet the other conditions.

You’ll get the Sure Start Maternity Grant for your first child only (or children if you have a multiple birth).

From 25 October 2010 most lone parents with a youngest child aged 7 or over will no longer be able to claim Income Support if claiming on the grounds of being a lone parent only. Instead, those able to take up paid employment may claim Jobseeker’s Allowance or, if their ability to work is limited by a disability or health condition, Employment and Support Allowance. The government intends, subject to the passage of the Welfare Reform Bill, to extend these rules in 2012 to lone parents where their child youngest child is aged 5 or above.

As announced on 24 May 2010, the government will reduce and then stop government contributions to Child Trust Funds.

Saving Gateway won't start

The Saving Gateway, due to launch in July 2010, will now not start.

New medical test to claim Disability Living Allowance

The government will introduce a medical test to claim Disability Living Allowance from 2013. You’ll have to take the test whether you’re a new or existing claimant. The test will replace the current application forms.

Housing Benefit

Budget 2010 announced a package of reforms to Housing Benefit, including:

  • changing the way Local Housing Allowances are worked out from October 2011
  • uprating Local Housing Allowances from 2013-14 using the Consumer Price Index (CPI)
  • setting a maximum Local Housing Allowance amount for each property size
  • from October 2010 Support for Mortgage Interest payments will use an interest rate equal to the Bank of England’s published monthly Average Mortgage Rate
  • maximum limits on Housing Benefit (from £250 a week for a one-bedroom property to £400 a week for a four-bedroom or larger)
  • from April 2013, the size of houses for working age people in the social sector will reflect family size
  • reversing the freeze since 2001-02 in deductions for non-dependents – these will be uprated in April 2011 based on the Consumer Price Index (CPI)
  • from April 2013 reducing Housing Benefit to 90 per cent after 12 months of getting Jobseekers Allowance
  • increasing the budget for hardship cases (Discretionary Housing Payments) by £40 million
  • covering the cost of an extra room for disabled claimants who need a carer

Benefits will be worked out using the Consumer Prices Index (CPI)

Benefits and tax credits will be worked out using the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) from April 2011. The CPI and the RPI are used by government and economists to work out how much prices increase each year. The CPI is usually lower than RPI as the CPI doesn't count housing costs.