October DWP and HMRC money changes for PIP, Universal Credit, ESA and pensioners

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People can expect to see several DWP and HMRC money changes during October. Labour has already announced several new financial measures including restrictions to the Winter Fuel Payment, to help fill a £22 billion black hole in Britain's finances.

With Labour already promising it will not raise income tax, employee National Insurance contributions or VAT, some finance experts are expecting the Treasury to go after other areas such as inheritance tax and capital gains tax instead. But it seems the government has ruled out scrapping the single person's discount on council tax.

Details of any such measures will come to light in the Budget on October 30 and take effect shortly after that but there will be plenty going on in the lead-up to that fiscal event. Here we look at the main DWP and HMRC changes this October.

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'Difficult decisions' on benefit reforms

Chancellor Rachel Reeves has warned of "difficult decisions" on tax, spending and welfare in Labour's first Budget on October 30. We don't know for sure what welfare changes will be announced but it seems likely it will include an overhaul of Personal Independence Payment (PIP) and a manifesto commitment to reform or replace the work capability assessment that's used to decide if people on Universal Credit and ESA are fit for work.

The previous government proposed a major revamp of PIP that included replacing cash payments with vouchers, with public consultation continuing through the General Election and into Labour's new administration. Asked if the proposals outlined in the green paper would be implemented, Sir Stephen Timms, Labour's new Minister of State for Social Security and Disability, said: "We will be setting out our own plans for social security in due course and will fulfil our continued commitment to work with disabled people so that their views and voices are at the heart of all that we do."

The Institute for Fiscal Studies says the options Labour will be forced to consider when reining in spending on disability benefits include cutting payment levels, restricting eligibility, or a longer-term plan to invest in NHS healthcare and work-related programmes. It warned that immediately reducing the amounts that are paid out - with as much up as £737 a month going to 3.6 million people on PIP - would be the most effective way to achieve savings.

State Pension and benefits increases

The annual uprating of all benefits for the next financial year, including the State Pension, is traditionally confirmed during the Autumn Budget. It looks like the full amount of the New State Pension is set to rise by £460 from next April from £11,502.40 to £11,962.60 a year. Meanwhile, someone on the full rate of the old, pre-2016 Basic State Pension will see a rise from £8,814 to £9,167 per year, an annual increase of £353.

This is in accordance with the triple lock that guarantees the State Pension increases every April in line with whichever is the highest of average earnings growth (in May-July), CPI inflation in September, or 2.5 per cent. The dominant factor was pay growth of 4 per cent.

September's inflation rate is used to decide the increase in most other benefits such as Universal Credit, PIP, Housing Benefit, Employment and Support Allowance (ESA), Disability Living Allowance and Carer's Allowance, as well as Child Benefit which is separately handled by HMRC. This CPI figure is expected to be announced later this month. August's inflation rate was 2.2 per cent.

PIP assessment and review changes

Some changes to the PIP system have just been introduced and are now taking effect. These include assessments for the benefit being carried out by the same contractor in any given geographical region. This streamlining will eventually lead to the rollout of a new nationwide Health Assessment Service in five years.

In addition, extra funding means the DWP can get through new applications for PIP much more quickly, freeing up resources for dealing with the backlog of reviews of existing claims. Sir Stephen Timms said: "We have been actively recruiting additional case managers to meet increased demand for PIP, which means we are now in a position to begin to deploy additional resource onto award reviews. This will increase the number of review cases we can complete 'in house'."

Other procedures "to increase efficiency" include making quicker decisions on reviews without needing to arrange an assessment if enough evidence is available. In addition, most assessments are now carried out by phone without the need for a face-to-face appointment, and claimants with the most severe conditions are given an "ongoing award" of PIP with no need for reassessment except for a "light touch review" every 10 years.

Universal Credit changeover plans

Thousands of people are being asked to move on to Universal Credit. The DWP began to send letters in September to around 800,000 people who receive income-related Employment and Support Allowance (ESA), either on its own or with Housing Benefit.

Another 20,000 people, who are on income-based Jobseeker's Allowance, are also being asked to make the switch, plus all remaining people on tax credits who are in mixed-age households where one person is of State Pension age and the other isn't.

There are specific rules that apply to ESA recipients making the changeover. This group had originally been scheduled to transfer to Universal Credit in 2028/2029 but the move has been brought forward by four years.

Household Support Fund extended

The DWP has extended its Household Support Fund for an extra six months so it will run from October to next March. An additional £421 million has been shared among councils in England to distribute to hard-hit families, with extra cash also going to devolved administrations in Wales, Scotland and Northern Ireland for their own initiatives.

The fund includes an extra £49 million for 14 local authorities in the West Midlands. The DWP said the funding will help the 600,000 households living in poverty in the region with the cost of energy, water and food bills.

Birmingham's allocation is handled by the Birmingham Voluntary Service Council which has just announced it will relaunch the next round of funding in November. Previous funding for Birmingham has been used for £200 hardship payments going directly into the accounts of people on means-tested benefits and other low-income schemes.

Warm Home Discount reopens

October will see the reopening of the Warm Home Discount scheme. This pays £150 to people on eligible benefits who live in properties that have high energy costs.

Around 2.5 million people received the cash in the winter of 2022/2023 according to statistics released by the government in July 2023. For the Warm Home Discount in England and Wales, payments are made directly by the energy companies and go into your electricity account (not your bank account), with no need to apply unless you were told you were eligible by letter but didn't receive the money. In Scotland, however, those who aren't on Pension Credit Guarantee Credit do need to apply directly to their energy firm.

You can find a full list of energy suppliers taking part in the scheme here. If your provider stops trading, you may still be eligible for a Warm Home Discount.

Winter Fuel Payment letters being sent

This year's Winter Fuel Payment has been cut back so that only people on Pension Credit and some other means-tested benefits will get it. The changes will reduce the number of qualifying pensioners from 11.4 million to 1.5 million – most of whom claim Pension Credit – in a move expected to save around £1.4 billion this year.

The DWP says that if you're eligible, you will receive a letter in October or November saying how much you are due. It says most people will get their allowance, which is either £200 or £300, in November or December. If you reached State Pension age after the eligibility cut-off date of September 22, you won't be considered for the payment until next year.

HMRC tax return deadlines

HM Revenue and Customs says you must inform officials by October 5 if you need to complete a tax return and have not sent one in before. Registering for self-assessment can be done at the GOV.UK website.

If you are doing a tax return on a paper form, you must submit it by midnight on October 31, 2024. If doing an online tax return, you have much longer than the end of this month and need to submit it by the deadline of January 31, 2025.

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