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Indicative Assessable Income
Once you have worked out the claimant’s Indicative Maximum UC Amount, this must be reduced by any Indicative Assessable Income i.e. earnings and/or other income.

Any Earnings?

The earnings used for the Indicative UC Amount will be:

  • If getting Tax Credits - the annual earnings figure used by HMRC when assessing that award or, if the claimant has reported an updated expected earnings figure for the current tax year, the income they reported. This is then converted to a monthly amount ie by dividing it by 12, and notional amounts for tax and National insurance are deducted, or
  • If getting IR-ESA, IS or IB-JSA, the weekly amount of those earnings converted to a monthly figure, or
  • If neither of the above apply, but the claimant is getting HB, the weekly amount of those earnings converted to a monthly figure.

Once you have that earnings figure go on to deduct the appropriate work allowance.

Multiply result by 55% = deductible earnings

NOTE: For those getting Tax Credits - As the DWP will use the wage figure reported to them by HMRC to assess a claimant’s Indictive UC Amount this may be different to the claimant’s current wages. Remember a claimant’s Tax Credit award is usually based on their previous year’s income.


More on earnings when getting Tax Credits

The annual earnings figure is usually their gross earnings from employment / self-employment* (less any pension contributions reported to HMRC) in the previous tax year. However, DWP guidance states that where the claimant has reported a change in expected income for the current tax year to HMRC, it is this figure (with no disregard applied) that will be used to calculate their Indicative UC Amount – even if HMRC are still using their past year income because the change is less than £2,500. 

*NOTE: The Regulations do not apply the Minimum Income Floor to the Indicative UC Amount, so where HMRC report a low / no earnings for a self-employed person then it is this figure that the DWP will use.

IMPORTANT
For Tax Credit claimants the DWP will use the wages figure reported to them by HMRC to assess a claimant’s Indicative UC Amount, this may be different to the claimant’s current wages.



Any Benefit Income?

The DWP should get information about the benefit income that should reduce the claimant’s Indicative UC Amount from the Customer Information System. As normal, some benefit income is disregarded, and some reduces their UC award £ for £.


MISTAKES
 This appears to be a key area where errors can happen in the calculation of the Transitional Element. We have heard of the DWP not deducting: Carer’s Allowance, Widowed Parents Allowance and Industrial Injuries Disablement Benefit.

Where this happens the claimant should challenge this - by requesting a mandatory Reconsideration of their payment amount - as they could be being underpaid the Transitional Element.




Any ‘Other’ Income?

For any ‘unearned income’ such as: a works pension or student income; benefit income that doesn't show on the CIS; and assumed income from savings between £6,000 and £16,000 -  the DWP will look at what claimant has put on their claim/declaration. This is treated as unearned income for the Indicative UC Amount and so reduces it £ for £.


FAQs
What if it later turns out that the claimant was in receipt of the wrong level of legacy benefits or their personal circumstances were different?
 
Where the information used to work out the claimant's Transitional Element later turns out to be inaccurate or incomplete the DWP can review the assessment if this was due to:
 
  • Misrepresentation by the claimant, or
  • Failure by the claimant to report information and that failure was advantageous to the claimant ie they were awarded more UC, or
  • Official error

This would also apply where on their Migration Day the claimant:
 
  • Was awaiting the decision to revise or supersede a decision in relation to an award of an exiting benefit, or
  • Was awaiting the outcome of an appeal in relation to an award of an exiting benefit.
 
More information with examples - click here.
 
 
If an Element is missing from the claimant’s Indicative UC Amount, can they still receive it in their normal UC awards?

Yes! The calculation of the IUCA is completely separate from the claimant’s normal UC awards. Their normal UC awards should include all the Elements they are entitled to based on the information they give the DWP. 
One example where this has happened is those who were just claiming Tax Credits, and who were liable for rent but were not claiming Housing Benefit. When they moved onto UC through Managed Migration, their Indicative UC Amount did not include a Housing Costs Element, because they were not claiming Housing Benefit on their Migration Day, but their 'real life' UC award does include a Housing Costs Element, because they are liable for rent and meet the other criteria to have a HCE included.

 
If the claimant is not receiving Child Tax Credit will the DWP not just base the number of Child Elements included in the IUCA on their UC claim?

Our understanding is that they will not – no Child Tax Credit in payment means no Child Elements included in the IUCA. We have seen an example of this in practise and the IUCA did not include a Child Element even though the claimant’s actual UC awards did. 





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