A detailed - in Part 3 of a four part Benefits and Cancer overview series. This focuses on Step 2, - the changing world of means tested benefits and tax credits. These can top up Step 1 or be there instead of them
Welcome back to Part 3 of 4 parts of a detailed overview of benefits most relevant to people affected by cancer:
- In the first part – see links at the end – we looked at the extra costs cancer can bring, how benefits - while helpful - are often underclaimed, some basic benefits jargon and suggested a “three steps” approach to navigate your way through the benefits maze to track down all the benefits that you might be entitled to.
- In the second part, we focussed in on Step 1 - those basic earnings replacement benefits and statutory payments from an employer most relevant to people affected by cancer
- Now we move on to Step 2: Means Tested Benefits and Tax Credits. These act as an alternative or a top up to Step 1 to offer help when income is low – or temporarily reduced. They also offer help with certain specific costs, such as rent, council tax and health costs (such as dental and optical charges and fares to hospital)
- So what is Step 2 again?
Step 1, was based on the post war “social security for all,” push for a largely non-means tested system based on mutual National Insurance. We all pay in and draw benefits regardless of income and savings along the same lines as the NHS.
That did leave a small need for a safety net for people who need support, but don’t have the right national insurance record, need some top ups for extra needs or who are in situations that don’t have a Step1 benefits. And that’s where a small means tested provision comes in that we are calling Step 2.
From small beginnings Step 2 has grown rather - from 1 in 38 of the population to more than 1 in 5 – for a number of reasons:
- Changing social trends show up gaps in Step 1 – extra community care needs, more lone parent households, new moves to support workers with families or disabilities on low wages
- Erosion of Step 1 benefits - Step 2 benefits do add extra complications of means testing and admin costs and are less good at reaching people. But they do mean less resources are needed overall. So, amounts for long term sickness, disability support, partners and children have been gradually removed from Step 1 benefits, meaning more people may need a top up from Step 2 for these. Time limiting has also increased.
- Targeting increased resources: similarly, when extra resources are being put in to tackle child or pensioner poverty they can target at those on lower incomes by Child Tax Credit rather than Child Benefit or Pension Credit rather than Retirement Pension.
- Housing Benefit has grown significantly : as both levels of rent and numbers needing help have risen as successive Governments have switched out of “bricks and mortar” subsidy for low rent housing in favour of market-based solutions that haven’t quite turned out as hoped.
Means tested benefits and tax credits are affected by other income or savings and are always claimed jointly with any partner. They do three main things:
- act as a “safety net” to guarantee a minimum income when not in work e.g. instead of or as a top up to a Step 1 benefit
2. help with low or reduced income when you - or your partner - are in paid work
3. help with certain specific costs – mortgage interest, rent, council tax, health costs - if you are on a low income whether in paid work or not.
In Step 2, you claim together with any partner rather than as an individual in Steps 1 and 3. So the sums for Step 2 benefits have extra amounts for partners and children (dealt with separately) along with some extra amounts for: disability, caring and being of pension age. There are also rules about what counts as income and savings. It is also the place for help with housing costs
So that’s why as well as acting as the originally intended “safety net” for those who couldn’t get a Step 1 benefit, the Step 2 benefits are often needed as a top up by people who can claim under Step 1.
So, if you claim Contributory ESA, Carers Allowance or Retirement Pension under Step 1 it can be really be worth taking a look at Step 2 as you may well be entitled to a top up from Step 2. And the extra amounts for “disability" in most of these - aprt from for adults in Universal Credit - also make it really worth checking back at Step 2 again, if you are later awarded a benefit like Personal Independence Payment or Attendance Allowance from Step 3. More on that next time.
- Means tested benefits to top up your income
At one time these were all part of the same benefit Income Support, but became separated off to connect more closely with their Step 1 equivalents. They all do the same job to act as a safety net benefit to try to ensure that no one is left with less than “the minimum the law says you need to live on” as the letters from DWP put it. They are:
- Income-related ESA* -when claiming ESA for being too unwell to work
- Income-based Jobseeker's Allowance* - if reasonably well and actively looking for work
- Income Support * - remains in other cases such as a top up to Statutory Sick Pay, for carers and for lone parents
- Pension Credit - for those over "pension age"
The first three “working age” benefits – marked with an * - will disappear - along with Housing Benefit and Tax Credits - see below into Universal Credit by March 2023. Collectively these are often referred to as the "legacy benefits" . More on that change below as well.
Pension Credit will remain separate, but will see some knock-on effects as a result of the disappearance of Housing Benefit and Child Tax credit into UC but which older people may also need (see below)
The criteria for Step 2 benefits are the same as Step 1 equivalents e.g.
- the sickness test mentioned last time for Contributory ESA is exactly the same for Income-related ESA here in Step 2
- the age condition for Pension Credit is the same as the women’s age for Retirement Pension
- someone meeting the criteria for Carers Allowance can claim a top up from Income Support as a carer
It’s just that Step 2 benefits go a bit wider and plug some of the gaps in Step 1, so Income Support may also top up Statutory Sick Pay, help lone parents and a range of small miscellaneous groups
You can only claim one of these four at the same time. Sometimes you may have a choice and might want advice as which way to go. Or it might be that each partner in a couple has a different reason and either one might claim the appropriate benefit for them.
If you are of “pension age” life is a little simpler as you head for Pension Credit. The main issue with PC is that some 40% of people who have an entitlement don’t actually claim it. Don’t let that be you!
There is though a choice if one partner is below pension age and the other is over. In DWP jargon you would be a “mixed age” couple. But that choice will disappear at some point in 2019 and for new claims, the younger partner will have to claim Universal Credit with considerable losses compared to a joint Pension Credit claim.
So, if you are such a couple get your Pension Credit claim in now, and if you are thinking about becoming one, it may well be worth bearing changes in mind and not waiting too long.
- How do the sums work for means tested benefits?
a: Are you below any savings limit?
This is usually £16,000 but there is no limit for Pension Credit or Tax Credits below.
b: What is the maximum amount payable in your circumstances if you had no income?
That "applicable - knows as appropriate under PC amount is made up of: :
- an amount for you and any partner (children are dealt with separately under Child tax Credit below).
- Extra amounts linked to e.g.: pension age, being a carer, passing one of the sickness tests for ESA, getting a “disability benefit” from Step 3 or having mortgage interest to pay.
c) Do you have any assessable income?
That might be other benefits, some earnings, private pensions and other income. There are important amounts that are ignored such as most of the Step 3 benefits we will look at next time
d: Take one from t'other
i.e. b (applicable amount) minus c (income) = the amount payable. The idea then is not to pay you the full “applicable amount” necessarily, but to top up any other income you and any partner – have up to that amount.
Even the smallest award can make a big difference eg just 10p of Pension Credit can passport them into full help with rent, council tax and health costs , even if savings are well over the £16,000 limit that normally applies yo those other benefits.
- Tax credits
The idea of helping out people in work but on low incomes – especially working families and those at a disadvantage finding work because of long term health problems and disabilities first emerged in the 1970s. They were part of the DWP benefits system – if working a bit differently – then became linked to income tax systems and moved over to HMRC. Why - the logic ran - do a separate means test when everyone gets a means tested by the tax system anyway?
There is no age limit on either tax credit, so they can be helpful to older people too, if they have either carried on working after pension age or have taken on the grandchildren.
4.1 Working Tax Credit (WTC)
This helps when you are in work on a low or temporarily reduced income. This can be very useful when income begins to drop off at the start of cancer journey or perhaps in recovery when easing back into work on less hours or easier duties perhaps with reduced pay as a result. There is no age limit on tax credits
You still count as in work in the first 6 months of sickness and even after that WTC may still apply if your partner is working enough hours to qualify.
Tax credits sums follow a similar basic idea as means tested benefits above, but in a very different income tax, annual calculation sort of way. You will get your maximum Working Tax Credit at taxable incomes below £6, 420 but then the amount tapers away at 41p in the pound. It can though take quite a while for all that maximum Working Tax Credit to disappear, especially with extra additions for disabled workers. And if you are claiming WTC alongside Child Tax Credit then your income has to be higher again before that help disappears too.
It is then thinking of tax credits as going a bit further up the scale than the basic safety net levels of means tested benefits.
The annual nature of the sums means that while flexible, tax credits don’t always reflect an immediate change and drop in income, but they can be revised according to what you might now expect to earn in your new circumstances.
4.2 Child Tax Credit (CTC)
Help for children that used to be extra amounts in earlier “in work” benefits before Working Tax Credit and also in the mainly “out of work” means tested benefits above, were merged into a common Child Tax Credit.
The idea was to simplify things, pay amounts for children separately to the main carer of those children as they tended to reach children better, increase amounts significantly and to help bridge the gap between out of work means tested benefits and in work tax credits.
So, anyone with children can claim Child Tax Credit on top of a non-means tested Child Benefit (still known by many under its old name of Family Allowance).
CTC sets a maximum amount according to the number of children with extras amounts if any of the children and young people being claimed for have long term health issues or disabilities.
It also crosses the bridge between the Means Tested benefits and Tax Credits way of doing the sums. Anyone getting one of the means tested benefits automatically gets the maximum Child Tax credit amount. Those on other benefits, with other incomes or working go through the same sums as Working Tax credit.
When claimed on its own, you get the maximum CTC if your household income is under £16,105. And if claimed with Working Tax Credit, the CTC will not start to taper off until at least that level of income, but often a much higher level.
It may then take quite a while for all CTC to taper away so again, don’t discount the possibility of any help from CTC without checking the sums as help could be available at £30,000 or more. There is no set limit as the sums will be individual to your circumstances.
- Help with Housing costs
These can apply whether you are working or not. And whatever your situation:
5.1 Housing Benefit (HB)
Housing Benefit helps with the rent - it is a national scheme funded and controlled by the DWP but administered by your local council. Because it uses the same sums as the other means tested benefit, anyone receiving one of those can bypass the financial assessment for HB and will automatically get the maximum help that HB can offer.
But unlike those other means tested benefits, HB does not stop if your income is over that “applicable amount”. Rather that maximum level of help starts to taper off the higher your income gets.
With rents rising in recent years more and more people at higher incomes than before have qualified for help from HB)
Help with mortgage interest used to come through extra amounts within the means tested benefits but is now a separate loans scheme
5.2 Council Tax Support
It’s predecessor Council Tax Benefit was run on a similar basis as HB, but has now been handed over - with a cut - to local councils in England. For those under pension age the scheme varies a little from area to area as councils try and make the available funds cover demand. The old scheme remains in all but name for those of pension age.
In Scotland and Wales, the devolved Governments have both stepped in and funded the shortfall, which means that the previous Council Tax Benefit rules apply to everyone. Northern Ireland never had the poll tax so did not need a scheme to help with this modified form of it. Help though is available with the rates.
If you are claiming Housing Benefit, then you will usually be able to claim Council Tax Support on the same form
However, this historic link gets broken in Universal Credit areas and many don’t realise this. If you claim Universal Credit, then help with rent will come within your UC. You will though need to make a separate claim for help with council tax from your local council.
As with HB, you will get the maximum help available if you receive one of the four means tested benefits to top up income. But again, if your income is a little too high for one of those then you may still get some help with the amount you get tapering off.
Before the changes the maximum help could cover your council tax up to Band E. However, in some areas of England the scheme is less generous to make the sums add up. So, it may be that full support is only available up to Band A or that everyone has to pay something out of their other benefits as under the poll tax.
If you are of pension age and in your own home, you are particularly likely to be missing out – only some 30 to 40% claim. So, it is very well worth checking this out, especially as other benefits related to cancer may have boosted your entitlement. Indeed, often an Adviser may tell you that you not only qualify for help with council tax but other benefits too.
- Health costs
You may get some of these covered on a non-means tested basis anyway e.g. free prescriptions for pensioners and people affected by cancer across the UK (and for everyone in the devolved nations). But where prescription charges do apply, anyone with cancer may be exempt but other family members may not be so help is available.
So, people can still face prescription charges Meanwhile other health costs remain with some differences between the home nations – in relation to travel to hospital - often at regional cancer centres some way from home - or dental and optical charges. If you receive one of the four means tested benefits we looked at first you will qualify for full help automatically.
If you qualify for tax credits or Universal Credit with earnings below certain levels, then you can also qualify. HMRC provide annual certificates to prove your exemption. Because Universal Credit can vary a bit you may need to show on screen or print off your last monthly statement to evidence entitlement
A real problem has emerged from with old NHS forms don’t have an UC box to tick. The outdated advice from NHS is to tick the JSA box instead., so do follow that. But there is no excuse for trigger happy penalties when you may have quite reasonably ticked a far more relevant box instead. Get advice if you have difficulties
If your income is a bit above these levels, you can still apply separately and have your income assessed. You may then get full or partial help with health costs.
- Universal Credit (UC)
The "full service form of Universal Credit reached all areas of the UK in December 2018. This is the one that is capable of taking claims from all the groups that UC covers: jobseekers, those too unwell to work, carers, lone parents, those in work and so on. Before that, the trial version of UC - known as "Live Service" - had only taken claims from some job seekers Other jobseekers have continued to claim JSA and others the appropriate "legacy benefit" This means that
- most entirely new claims for people of working age will be for Universal Credit, instead of the six "legacy benefits" that UC will eventually replace : Income Support, Income-related ESA, Income-based JSA, Housing Benefit, Working Tax Credit and Child Tax Credit.
- The one exception is for anyone receiving an amount called a severe disability premium within their legacy benefits who cannot claim UC to protect them from a big loss in the UC sums. This came about after a court case involving a Maggie's Centre visitor, who bravely took on the Government.
- However, Pension Credit, Council Tax Support and help with health costs remain outside Universal Credit, as do all other benefits, such as those in Step 1 and Step 3
However, though new claims most claimants will be on the old legacy benefits for quite some time yet, so while mostly closed to new claims, those legacy benefits will still be around for some time yet and not finally due to fade away until September 2024 (at the last revised estimate.
UC is more than just an administrative merger of those six benefits. Rather, UC aims to “do benefits” in a very different way, so the processes can seem rather new and unfamiliar, if you have previous experience of the “legacy benefits”
UC really merits a blog or two of its own to get to grips with similarities and differences to the old system, in its very different online environment.
- The sums follow the same basic principles as the legacy benefits, but with the with the regrettable absence of separate adult additions for those with disability.
- The assessments for sickness is the same as ESA, so there is no need for a re-assessment if you move from Income-related ESA over to Universal Credit, but UC behaves a little differently during that test for those that do need it – will be a little different from ESA
There has been confusion as to when you do or don’t need to move over from legacy benefits to UC. It can be worth getting independent advice before doing so, as official agencies can give conflicting advice and you could lose out if you switch too early. However, some changes - from January 2019 - will reduce the risk for many - but by no means all - people with long term health issues such as cancer who make the switch.
However, those making new UC claims will simply start at what may often be a lower rate than legacy benefits, although some will do better on UC.
There is a lot of fixing and tweaking still needed with UC for its new group of claimants who are unwell, in work, carers or lone parents. Much of the focus, design and transformative thinking has been around UC as a new approach for jobseekers. But these will be a small minority of claimants once UC has fully rolled out. There may be some further work to be done to make UC fit for purpose for the majority of people it will serve who are either in work already or not rquired to be looking for work as unwell or carers. The DWP have said it may take “10 years to optimise the design of UC”
That said real improvements have been made, if perhaps late in the day, given that UC has been around since April 2013. Some of the bad news stories of Autumn 2017 - of people being left stranded in those first few weeks of a claim, hanging on expensive call lines and finding stressed and confused staff at the other end - have improved dramatically, by measures rolled out in the spring of 2018.
More people are now finding their claims go smoothly and everything feels a little less chaotic. But if at all worried do read more and get advice.
Step 2 benefits are inevitably a bit more complicated because of the additional financial assessment involved. There are huge ambitions to simplify things within Universal Credit (UC) even if there is an element of work in progress getting there.
If you are older, Pension Credit (PC) claim forms are much simpler for what is in effect the same benefit as the other three benefits that were once all part of Income Support. And it is a lot more generous with no savings limit. So please do check out whether you might be among the many who are missing out
They do provide real extra support and plug gaps in Step 1 and often stretch considerably further up the income scale than just being a subsistence “safety net”. In many cases, your entitlement can increase as a result of an award of a disability or carers benefit, which may well apply to people affected by cancer.
So please do not count yourself out. Take a passing look at Step 2 at the very least and have a look at more detailed blogs that explain each of these benefits in a little more detail.
And please do post queries and concerns n forums here or drop into your nearest Maggie’s Centre for one to one advice and support from my colleagues
Links and further reading
To less detailed overview
- .Find out more about.... Benefits and Cancer
- Find out more about befits for... Difficulties with day to day living and getting around
- Benefits and Cancer an Overview - a shorter summary version of the four blogs in this series - here
To other blog in this series
- Benefits and Cancer 1: An Introduction: Costs and benefits, myths, basic jargon and three steps to full entitlement - here
- Benefits and Cancer 3 : Step 2 - Means tested benefits and tax credits - here
- Benefits and Cancer 4: Step 3 - Extra non-means tesed benefits for children and disability - here
To more detailed blogs on Step 2 benefits
- You may like to read my other my other blogs on individual benefits or groups of benefits for more details and examples about the criteria, forms, issues to help you make your claim.
- As more are of these appear here at Maggie's Online, I will list the key ones to start off your further investigation of these benefits.