Someone who is currently in receipt of Housing Benefit should report any change in their circumstances to the HB Office who may be able to reassess their entitlement.
The income figure used by the HB Office is always an estimate of future earnings based on past income. The HB Office can use whatever period of time they think is most suitable as long as this does not exceed 12 months. They can also review this estimate - as long as it is reasonable to do so.
So where someone's self-employed income has dropped and is likely to be low for a while, then the HB Office may agree to review their HB award to use a lower income figure.
If they decide to close their business permanently, then they should let the HB Office know (as well as HMRC and their accountant!). HB can then be re-assessed on any other assessable income they have.
How are payments from the Self-Employed Income Support Scheme (SESS) treated?
They are treated as earnings so form part of the claimant's self-employed income, and can be offset by allowable expenses.
'No changes to HB regulations are required as the SEISS grant remains a payment of taxable income received from self-employment. The SEISS payment is part of the self-employed income assessment for the tax year in which it is received.'
The Housing Benefit Regulations have not been amended to cater for this grant, as confirmed in the DWP bulletin above.
That bulletin says SEISS payments are counted as earnings for the tax year in which they are received, but this does not necessarily mean that they will be spread over the entire tax year. The HB Regulations are very flexible and while one could make a case for taking the income into account over a whole year the payment could also justifiably be spread over three months.
All that the Regulations require is that the HB Office estimate the claimant's earnings by reference to an "assessment period" of no more than one year. Some councils are taking no account of the SEISS grant in the current year, instead they will estimate next year's income (if the claimant is still on HB by then) based on this year's income and so the SEISS will not affect HB until next year.
Other HB Offices are taking it into account over three months starting from when it is received.
It is difficult to say that either of those approaches is wrong. There does seem to be solid consensus that it would be incorrect to backdate the income over the three months for which it is notionally being paid - very few if any HB Offices will take it into account retrospectively, as any changes to self-employed earnings are always picked up prospectively.
What should the HB Office do where someone's earnings are currently nil but they may get a payment from the Self-Employed Income Support Scheme?
Applications for the second tranche of the SEISS are open from August 17th to October 19th.
Where the claimant's current earnings have dropped to nil, then the HB Office can reassess the claimant's HB award using an estimate of nil wages (although they do not have to do this).
When the claimant receives the SEISS payment it will mean that their projected income may now be higher than the income the HB Office has been using; if this is the case then they should inform the HB Office who will adjust their ongoing HB award.
What about the 16/30 hour earnings disregard?
This is applied where the claimant is still in receipt of Working Tax Credit, but also for other claimants who have been receiving it, as - assuming they have not closed their business permanently - they are still treated as working their normal hours.
HB Circular A7/2020 confirmed: 'Claimants who have been furloughed or whose hours have been reduced temporarily will continue to be entitled to WTC as they will be treated as still working their normal hours for 8 weeks* when entitlement will be reviewed. This means they will also continue to be entitled to the additional earnings disregard for the same period.'
*Please note: since this Circular was written HMRC announced that claimants will be treated as working their normal hours until the end of the Self-Employed Income Support Scheme in October.
What if they are awaiting an increase in their Tax Credit award?
Where a claimant is in receipt of Housing Benefit, any payment of Tax Credit arrears should be treated as capital and not as income.
HB Circular A7/2020
confirmed this where Tax Credit claimants are waiting for the increased £20 a week announced by the government - but this rule applies to all Tax Credit arrears payments:
'This means that in cases where HB claims do not see the increased rate of the additional earnings disregard and increased rate to the basic element of WTC applied to individual claims within the same benefit week, overpayments are not created.'
Could they be better off on Universal Credit?
Perhaps. Someone whose earnings have dropped may now be better off if they claim Universal Credit if eligible – they should seek advice from a Benefits Adviser who will be able to conduct a better off calculation. And where they are going to recieve a payment from the SEISS them timing could be crucial - click here for more information.
NOTE: Some claimants - ie those protected by the ‘SDP Gateway (NOTE: the SDP Gateway no longer applies - it was revoked from 27th January 2021)’ - may be able to make a new claim for Income-Related ESA or Income-Based Jobseekers Allowance.
If they are going to stay on HB, and their total 'welfare' is higher than their Benefit Cap limit, then make sure the Benefit Cap is not applied straight away if they are entitled to the 'grace period'.
The grace period applies where the claimant or their partner has been in paid work for 50 out of the previous 52 weeks.
In these cases the Benefit Cap should not be applied until after the 9 month grace period. (Note that some claimants are exempt from the Benefit Cap anyway, due to receiving certain other benefits).
If they are not already receiving Council Tax Support they should notify the Local Authority that they would like to claim as soon as possible.
If they have school age children they may now be entitled to free school meals.