There are many ways that parents can take time off work; this could be for maternity leave, shared parental leave or unpaid parental leave. If you are taking leave and your pay is reduced, you should check whether there are any benefits you may be eligible for. This article provides a guide to what benefits you might be able to claim if your earnings are reduced by taking leave.
If your household income is reduced by taking parental leave you may qualify for increased awards of – or start qualifying for – the following benefits:
- Universal Credit
- Tax Credits
- Income Support
- Housing Benefit
- Council tax reduction
Universal Credit has replaced Tax Credits, Income Support, Housing Benefit and Jobseekers Allowance. Depending on your circumstances you will probably be unable to make a new claim for these benefits and have to claim Universal Credit instead.
It is important to remember that all of the benefits mentioned above will take into account your partner’s income. This means that your household income may be too high to qualify even if one of you is not earning anything.
You can check your potential entitlement to all these benefits on https://www.entitledto.co.uk/.
You may be eligible to claim Universal Credit
Universal credit is paid monthly in arrears, therefore a reduction in your income should result in an increased award in the current month. If your earned income is above the ‘work allowance’ (the lower limit where earnings affect the award) but below the maximum earnings, then for every £1 that your earned income goes down your universal credit award will increase by 63p.
The rules about universal credit sanctions are complex, it may be possible that you are sanctioned for taking unpaid parental leave, this would mean that you would not receive the personal allowance part of your universal credit award. Your housing element and child element would not be affected.
You should not be sanctioned if you can show that you had good reason for taking unpaid parental leave, e.g. no affordable childcare available during the school holidays, or a sick child needing your presence at home or at their bedside in hospital. You will find more information on Universal Credit here.
You may be eligible to claim Council Tax Reduction
This benefit is administered by your local authority and is calculated on a weekly basis. You may qualify for an increased award during any week where your earnings are lower than usual. You will find more information on this here.
If you are already receiving Tax Credits
Your tax credit award for the current year is based on your income from the previous year, this remains true unless your annual income changes by more than £2500. If your income in the current year drops by less than £2500 your tax credit award will not change, however you will get a higher award next year.
If you are already receiving Income Support
If you are on parental leave from work you are entitled to income support if all of the following apply to you:
- You are responsible for a child who lives with you
- You were entitled to working tax credit, CTC payable at a higher rate than the family element or housing benefit on the day before your parental leave began.
- Your partner is not working
- You are not entitled to receive any payments from your employer
- You and your partner do not have capital worth over £16,000
If you do not meet the conditions above you can also qualify for income support if you are a single parent on a low income with a child under five and you do not have capital worth £16,000 or over.
If you or your partner receive SMP, maternity allowance or any wages these will be deducted from your income support award.
If you are already on Housing Benefit
This benefit is administered by your local authority and is calculated on a weekly basis. You may qualify for an increased award during any week where your earnings are lower than usual.
If you have further questions and would like to contact our advice team please use our advice contact form below or call us.