State Benefits – Low Income

State Benefits

Benefits for people on Low-Income

Universal Credit

Universal Credit is a new benefit that was introduced through the Welfare Reform Act 2012. Universal Credit is a means-tested benefit for people of working age, and the upper age limit to claim is up to the point at which people qualify for pension credit. The benefit was first introduced in October 2013 for new claimants.

The benefit supports people that are working and on a low income or people that are out of work.

Universal Credit is paid monthly in arrears in England, Wales and Scotland, however, claimants can ask for fortnightly payments if they meet certain conditions. In Northern Ireland, the default payment period is every fortnight, but claimants can choose to get monthly payments

Universal Credit has been one of the biggest ‘shake ups’ to the benefits system and due to the number of changes required it is being phased in. The full roll of out Universal Credit is not expected to be complete until the mid-2020s and there are still thousands of people one ‘legacy benefits’ such as income-based ESA and JSA.

Universal Credit is being introduced gradually to replace all of the following benefits by October 2021:

– Income-based Jobseekers Allowance
– Income-based Employment & Support Allowance
– Income Support
– Housing Benefit
– Child Tax Credits & Working Tax Credits

Universal Credit will not replace the following benefits:

– Personal Independence Payment (PIP)
– Carers Allowance
– Child Benefits
– Statutory Sick Pay (SSP)
– Statutory Maternity Pay

Universal Credit claims must be made per household and not individually. The amount payable is calculated on the household income and circumstances of the household members.


Claimants may be eligible for universal credit if they:

  • are on a low income or out of work
  • are  18 or over (there are some exceptions if the claimant is 16 to 17)
  • are  under the State Pension age (or the claimant’s partner is)
  • have less than £16,000 or less in savings between the claimant and their partner
  • live in the UK

The Universal Credit award (total payment) is also affected by the number of children the claimant has and also if they have a health condition that affects their ability to work.

Claimants may also receive additional payments if:

  • they are registered carers and in receipt of carers allowance;
  • they have children or disabled children;
  • they have housing costs (rent, service charges);
  • they have additional childcare costs;
  • they have limited capability for work or limited capability for work and work-related activities. 

Universal Credit can still be paid if the claimant is working however the payment will depend on their earnings and the total award reduces the more the claimant earns from work.

Support for people who are ill or disabled

Statutory Sick Pay – (SSP)

Employers pay Statutory Sick Pay to their employees who are off work because they are too ill to work.


  • The claimant is employed and has started work with the employer
  • The claimant is sick for 4 consecutive days (including non-working days)
  • The claimant must earn above the lower earnings limit (LEL) for NICs
  • SSP is not means-tested.

The payments for SSP are subject to tax and NICs, similar to normal earnings. SSP is paid for a maximum of 28 weeks. Sickness spells of less than 8 weeks between them count as a single spell.

Employers initially pay the benefit and reclaim the amounts from the Department for Work and Pensions.

Key Terms:

LEL – The lower earnings limit is the amount above which an individual is entitled to NIC dependent benefits. Earnings in the LEL means the person does not pay NICs but gets the benefits of paying.

Incapacity Benefit

Incapacity Benefit has been replaced by Employment and Support Allowance and no new claims are allowed. It is a benefit to help people who are unable to work due to an illness or incapacity for at least 4 days in a row.

Income Support

Update: Universal Credit is replacing Income Support. Most new claimants will not be able to claim Income Support and must claim Universal Credit. 

Income Support is a tax-free benefit that is designed to top-up claimants that are on a low income.  Income Support is a means-tested benefit and doesn’t require the claimant to have paid sufficient class 1 NICs.

Eligibility: All of the following must apply to the claimant and their partner if they have one.

1. Have no income or a low income, and no more than £16,000 in savings

2. Not in full-time paid work (claimant can work less than 16 hours a week, and their partner can work less than 24 hours a week)

3. The claimant is not eligible for Jobseeker’s Allowance or Employment and Support Allowance

4. Live in England, Scotland or Wales

The claimant must also be between 16 and Pension Credit qualifying age, and at least one of the following:

  • pregnant
  • a lone parent (including a lone adoptive parent) with a child under 5
  • a lone foster parent with a child under 16
  • a single person looking after a child under 16 before they’re adopted
  • a carer
  • on maternity, paternity or parental leave
  • unable to work and you receive Statutory Sick Pay, Incapacity Benefit or Severe Disablement Allowance
  • in full-time education (not university), aged between 16 and 20, and a parent
  • in full-time education (not university), aged between 16 and 20, and not living with a parent or someone acting as a parent
  • a refugee learning English – your course needs to be at least 15 hours a week, and you must have started it within 12 months of entering the UK
  • in custody or due to attend court or a tribunal

The claimant does not need a permanent address – for example, they can still claim if they sleep rough or live in a hostel or care home.

Attendance Allowance – (AA)

Attendance Allowance is a tax-free benefit for people aged over state pension age that have an illness or severe disability and require someone to look after them.

Attendance Allowance is not means-tested and does not require the claimant to have paid a sufficient amount of NICs. It’s also exempt from the benefit cap so money will not be taken away from any other benefits (if claiming).

There are two different rates for Attendance Allowance, and the rate a claimant receives depends on the level of care they need. A higher rate is awarded if the claimant requires more care.

A higher rate is paid for people who need help both by day and night, a lower rate is paid for people who need help with personal care by day or at night.

Attendance Allowance cannot be claimed if the claimant is already receiving Disability Living Allowance or Personal Independence Payments.

Personal Independence Payment (PIP) – Previously Disability Living Allowance (DLA)

Disability Living Allowance is a tax-free benefit that helps with the extra costs of a long-term health condition or disability.

Since April 2013 Disability Living Allowance has been gradually replaced by Personal Independence Payment which is similar to DLA.

Personal Independence Payment:

1. Tax-free benefit

2. The claimant must be aged 16 or over, and PIP must be claimed before reaching the state pension age. No new claims can be made if the claimant reaches state pension age.

3. The claimant must also have a health condition or disability where:

– The claimant had difficulties with daily living or getting around (or both) for 3 months.

– Expects these difficulties to continue for at least 9 months

PIP rates

Personal Independence Payment is made up of two components:

The Mobility component (Some people call it mobility allowance) might be paid if the claimant needs help getting about.

The Daily Living component might be paid if the claimant needs help with carrying out everyday activities, such as washing and dressing.
Each component can be paid at either a standard or an enhanced rate.

Depending on how the condition affects the claimant, it’s possible to get one component or both, and either the standard or the enhanced rate. This is determined by an assessment with a healthcare professional or doctor.

Support for Mortgage Interest Loan (SMI)

The S.upport for Mortgage Interest Loan is designed to help people on benefits who are struggling to pay their mortgage, SMI helps. to pay the interest (not capital) on mortgages up to £200,000. Claimants receiving Pension Credit are generally only covered for interest on the first £100,000. The payments are made directly to the mortgage lender at a standard mortgage rate. The SMI loan is secured as a second charge on the property, and it is subject to interest.

Support for Mortgage Interest (SMI) is paid as a loan which must be repaid when the claimant dies or sells their home.

To get Support for Mortgage Interest, claimants must be out of work or State Pension age and receive one of the following:

  • Income Support
  • Income-based Jobseeker’s Allowance
  • Income-related Employment and Support Allowance
  • Universal Credit, or
  • Pension Credit.

There is a 39-week waiting period from the time SMI is claimed until the first payment is made (unless the claimant is getting Pension Credit, in which case they can get help immediately).

If the claimant does any paid work during these 39 weeks, the waiting period will stop – and the claimant can start it again the next time they are out of work.

Important Information

1. Claims can be made for the original mortgage amount and loans taken out for certain repairs and improvements to the home or to buy an ex-partner’s share in the home on separation.

2. Payments are made directly to the lender.

3. A standard rate of interest is used to calculate the payments.

4. Interest is charged on the loan and the interest rate is reviewed every 6 months.

5. The loan is secured on the property by a second charge.

6. All legal owners must consent to it.

7. The loan is repaid if the property is sold, transferred, or if the owner dies, or if the owner returns to work and pays voluntarily.

8. If there is insufficient equity in the property to repay the whole SMI loan the balance will be written off.

9. The loan is not payable if the property is transferred to the claimant’s partner on death and they stay in the property or f the property is transferred based on court orders.

10. The payments will continue indefinitely until the claimant no longer qualifies.

11. The claimant can choose to opt out at any time.

12. Buildings and contents insurance, endowment policy premiums are not covered by SMI.

13. If the claimant has been receiving SMI for 26 weeks but they are starting work then they can claim mortgage interest run-on. This pays the benefits for 4 weeks directly to the claimant.

52-Week Linking Rule

If a borrower has already served the waiting period and then ceases to claim payments for up to 52 weeks will not have to serve a waiting period at the start of the second claim. 

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