Understanding Universal Credit and Employment Support Allowance (ESA)

Self-employed workers are being encouraged to apply for Universal Credit if they are experiencing financial difficulty as a result of contracting coronavirus, having to self-isolate or because their income has dropped significantly.

Here we give you a brief overview of Universal Credit, how it works and how to apply. ISM members thinking about making a claim are advised to contact the membership team for further advice. Alternatively, contact the Universal Credit helpline or Citizens Advice.

What is Universal Credit?

Universal Credit supports you if you are on a low income or out of work. It includes a monthly payment to help with your living costs or twice a month for some people in Scotland.

Universal Credit is replacing the following benefits which are being phased out:

  • Child Tax Credit
  • Housing Benefit
  • Income Support
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)
  • Working Tax Credit
  • You can remain on any of the above benefits without needing to apply for Universal Credit. If your circumstances change in a way that would mean you would need to make a new claim to one of the other benefits however, you will need to claim Universal Credit instead as legacy benefits are not accepting new applicants.

    If you are receiving any of the above benefits or tax credits they will stop if you make a Universal Credit claim.

    Eligibility for Universal Credit

    There are a number of factors that will determine your eligibility for Universal Credit.

    The threshold for savings is £16,000 between you and your partner or spouse. You partner’s income will also be taken into account, even if they are not eligible for Universal Credit.

    If your spouse is of state pension age, you can still claim Universal Credit as a couple however when you both reach state pension age, your Universal Credit will stop.

    Universal Credit is designed to ensure that you have sufficient income to live on. There are no rules therefore regarding how many hours you can work. You will continue to receive Universal Credit regardless of the number of hours you work, however the amount of Universal Credit received will be reduced as your earnings rise.

    How to apply for Universal Credit

    You can apply for Universal Credit online here or speak to the helpline by phoning 0800 328 5644.

    You will need accurate information about your:

  • savings
  • income, including your partner’s (from payslips, for example)
  • existing benefits and pensions (including anyone living with you)
  • outgoings (such as rent, mortgage, childcare payments)
  • council tax bill
  • Changes to Universal Credit due to coronavirus

    The government has increased the Universal Credit standard allowance and basic element of working tax credits by £1,040 a year for 12 months. This will take the standard allowance for a single Universal Credit claimant to £409.89 per month.

    Another significant change is the temporary removal of the Minimum Income Floor requirement from 6 April 2020. The change will apply to all Universal Credit claimants and last for the duration of the outbreak.

    The Minimum Income Floor won’t apply before 6 April 2020 if you get coronavirus or have to stay at home because of it. Check if you need to stay at home.

    The Minimum Income Floor is the amount of money you are treated as earning, irrespective of whether you do and is the equivalent of someone working full time (35 hours per week unless you have other responsibilities such as caring for children). If you are self-employed and your earnings fall below this, the government requires you to look for work in order to bring your earnings up to the minimum income floor. If your earnings are more than the minimum income floor, your Universal Credit payment is based on your actual earnings.

    By removing the Minimum Income Floor it allows self-employed people to be treated the same as employed people within the Universal Credit system. This is a significant change and will positively impact those applying for Universal Credit.

    If possible, you should consider waiting to apply for Universal Credit until after 6 April so that this change may apply to you, as it will allow you to claim Universal Credit without having to seek or actively work to make up your earnings during this time.

    If you are self-employed and are making a new application for Universal Credit, you will not be required to attend a local jobcentre in person.

    It will still be possible to receive up to a months’ advance, although you should remember this is a loan that will be recouped through your monthly payments.

    If you need to claim Universal Credit or Employment and Support Allowance (ESA) because of coronavirus, you will not be required to produce a Fit Note.

    How to check whether you are eligible for Universal Credit or other Government benefits

    Use one of the following benefits calculators to check which benefits you are eligible for:

    Turn2us - for information on income-related benefits, tax credits, Council Tax Reduction, Carer’s Allowance, Universal Credit and how your benefits will be affected if you start work or change your working hours

    Policy in Practice - for information on income-related benefits, tax credits, contribution-based benefits, Council Tax Reduction, Carer’s Allowance, Universal Credit, how these are calculated and how your benefits will be affected if you start work or change your working hours

    entitledto - for information on income-related benefits, tax credits, contribution-based benefits, Council Tax Reduction, Carer’s Allowance, Universal Credit and how your benefits will be affected if you start work

    Employment Support Allowance

    In some cases, you may be able to apply for Employment and Support Allowance (ESA). ESA gives additional support to people who have limited capability to work because of their sickness or disability. It applies to people who do not get Statutory Sick Pay (SSP) which means those who are self-employed or are in employment but earn less than £118 a week should consider making a claim if they are unwell as a result of coronavirus.

    You can apply for ESA whether you are in or out of work. You must be under state pension age and there are no conditions to working while claiming ESA.

    To be eligible you have to have been employed or self-employed and meet the threshold for having made sufficient National Insurance contributions in the previous two to three years. National Insurance credits also count.

    You won’t be eligible for ESA if you receive the severe disability premium or are entitled to it.

    You cannot receive ESA at the same time as receiving SSP from your employer however you can apply for ESA up to three months before your SSP ends.

    ESA is also not offered to those currently receiving Statutory Maternity Pay or Jobseeker’s Allowance.

    You can, however, get Universal Credit at the same time or instead of ESA.

    How to apply for ESA

    There are different ways to apply depending on if you are already getting Universal Credit or not.

    If you’re already getting Universal Credit, speak to your work coach or case manager about applying. You can do this by signing in to your Universal Credit account. You will not have another Work Capability Assessment.

    If you’re not already getting Universal Credit, you’ll need to do both of these:

    • phone the Universal Credit helpline on 08003285644 (choose option 2) to arrange a new claim appointment with a work coach
    • fill in an ESA claim form

    You can fill in the form yourself or someone else can fill it in for you.

    Alternative formats:

    Phone the Universal Credit helpline to ask for alternative formats, such as braille, large print or audio CD.

    Can EU citizens apply for UK benefits?

    EU citizens may be able to claim benefits if they have the right to reside in the UK or are able to pass the habitual residence test. To pass this test, you’ll need to show you’ve made the UK your home and plan to stay here. You don’t need to pass the habitual residence test if you have settled status or have certain types of right to reside, for example because you are working or are self-employed.

    Further information can be found on the Citizens Advice website.