MILLIONS of households on several legacy benefits are being asked to switch to Universal Credit as part of a huge welfare shake-up.

All two million claimants on legacy benefits must move over to Universal Credit (UC) or pension credit by the end of March 2025, under a process known as managed migration.

Households waiting for their first Universal Credit payment can apply for an advance loan

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Households waiting for their first Universal Credit payment can apply for an advance loanCredit: Alamy

Universal Credit was set up to replace legacy benefits.

Eligible households are being contacted via letters in the post which tell them how to make the move from tax credits to Universal Credit.

Once you receive a letter, you have three months to move over, or you could lose your current benefits.

However, the latest statistics suggest that more than 31,000 people on tax credits who were invited to move to UC did not make a claim and have had their benefits stopped.

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There could be a number of reasons for this, one of which is the issue of the five-week wait for cash.

When initially enrolling on the Universal Credit system there can be quite a long wait for your first payment.

In some cases, it can take up to five weeks before you are in the system and this can cause problems for a lot of people.

Many households are left struggling to pay for essentials during this time, as other pre-existing benefits are usually cancelled.

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For example, under the managed migration process, if you claim tax credits, your entitlement will stop as soon as you apply for Universal Credit.

However, those on income support, housing benefit, income-based jobseeker’s allowance (JSA), income-related employment and support allowance (ESA) will continue to receive their old payments for two more weeks after they apply to Universal Credit. 

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This still leaves three weeks without benefits cash.

However, households waiting for their first Universal Credit payment can apply for an advance loan.

The advance loan is designed to help you bridge the gap while you are waiting for your first Universal Credit payment to kick in.

However, it is worth bearing in mind that it is not free cash, it is just a loan and the money does need to be paid back.

This means that the amount of Universal Credit you receive will be reduced until the cost of the loan has been repaid.

However, it can still be a lifeline for some. Here’s exactly how it works.

How much can I get?

Claimants can borrow up to 100% of their estimated payment, but you can also ask for less.

The benefit of this loan is that it is interest-free, so if you do need to borrow it makes sense to do this rather than get into debt elsewhere.

Don’t forget though, you do need to pay it back so think carefully before applying.

The money will be transferred to you within three working days and is supposed to last the full five weeks before your first payment.

How do I apply for an advance payment?

You can apply for a Universal Credit advance before you get your first payment of UC.

There are different ways you can apply for the loan.

You can apply with the help of your Jobcente work coach, or by calling the Universal Credit helpline.

You’re allowed to request the loan from the moment you first apply for Universal Credit until the date you get your first payment.

You’ll need to explain why you think you need the advance and provide infomation to verify your identity (at your first Jobcentre Plus interview) and provide bank details for the advance.

If you can’t open a bank account, speak to your work coach.

You’ll usually be told the same day if you will get your advance loan.

If you need help, call the Universal Credit helpline on 0800 328 5644.

Lines are open from 8am-6pm, Monday to Friday.

When do I have to pay an advance payment back?

You are expected to pay the loan back within the first 24 months of getting it.

To pay it back, the DWP deducts an amount from your Universal Credit payment every month.

You can work out how much will be deducted from your payment every month by dividing the full cost of the loan by 24.

For example, if you borrowed £1,500 you will see £62.50 taken off your Universal Credit payment every month.

You can ask for your repayments to be delayed for up to three months if you can’t afford them, but this will only be allowed in exceptional circumstances.

If you ring the helpline and are successful in your application they will tell you over the phone:

  • How much you can have
  • The monthly repayment amounts
  • When the first repayment is due

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You still have to pay it back within 12 months if you applied for the advance before April 12 this year though.

You only have six months if you’ve applied because of a change in circumstances, but you can ask for your repayments to be delayed by one month in this case.

Will I be better off on Universal Credit?

AROUND 1.4million people on legacy benefits will be better off after switching to Universal Credit, according to the government.

A further 300,000 would see no change in payments, while around 900,000 will be worse off under Universal Credit.

Of these, around 600,000 are expected to get top-up payments if they move under managed migration, so they don’t lose out on cash immediately.

The majority of those – around 400,000 – are claiming employment support allowance (ESA).

Around 100,000 are on tax credits while fewer than 50,000 each on other legacy benefits are expected to be affected.

Examples of those who may be entitled to less on Universal Credit according to the government include:

  • Households getting ESA who and the severe disability premium and enhanced disability premium
  • Households with the lower disabled child addition on legacy benefits
  • Self-employed households who are subject to the Minimum Income Floor after the 12 month grace period has ended
  • In-work households that worked a specific number of hours (e.g. lone parent working 16 hours claiming working tax credits
  • Households receiving tax credits with savings of more than £6,000 (and up to £16,000)

But if they don’t switch in the future, they’ll risk missing out on any future increase to benefits and see payments frozen.

Those who move voluntarily and are worse off won’t get these top-up payments and could lose cash.

Those who miss the deadline and later make a claim may also not get this transitional protection either.

The clock starts ticking on the three-month countdown from the date of the first letter, and reminders are sent via post and text message.

There is a one-month grace period after this, during which any claim to Universal Credit is backdated, and transitional protection can still be awarded.

This post first appeared on thesun.co.uk

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