A guide to benefits and debt

Read our guide on benefits and debt including the different kinds of benefits available in the UK and whether having outstanding debt can affect each one.

At Lowell, we understand that some of our customers might claim benefits and feel unsure how this works with clearing their debt. As always, our mission is to encourage open conversations about all debt-related topics and help to try and remove any sort of stigma. So, to help clear things up, we’ve created this guide to benefits and debt.

We put our customers first and want you to feel confident and comfortable when it comes to handling your debt with us. If you have any questions or concerns, then our friendly team will be more than happy to help. If you need more specialist support than what we can provide, we’ll help to put you in touch with the right organisations who can help.

Click on the links below to jump to the section you want to read and find out more about benefits and debt.

What are some of the different types of benefits in the UK?

Does being in debt impact my benefits?

What are benefit debt deductions?

What are benefits overpayments?

What are some of the different types of benefits in the UK?

Benefits are payments from the government to people who can’t work or have a low income. If you’re having a difficult time financially, it could be worth seeing whether you can receive any extra income.

Any money you can claim for benefits could help you out massively. Check out the Lowell benefits calculator, which is powered by Entitled to, to get an idea of which benefits you could be eligible for, or what other types of financial support you could be entitled to.

If you’re still unsure, there are lots of independent organisations you can speak to for free independent advice and support.

The Citizens Advice website has lots of information about benefits, but you can also contact them if you need more information or visit your local Citizens Advice centre if you prefer to speak in person.

MoneyHelper is a government-backed initiative that provides impartial guidance on a range of matters including what benefits you might be entitled to. You can speak to their trained staff online or over the phone for free money guidance.

Universal Credit

Universal credit is there to help if you’re on a low income and is available to both people who have a job or are unemployed. After applying, it can take up to five weeks before you receive your first payment. This is because there is a one-month assessment period which is followed by a wait of up to 7 days for the payment to go into your account.

How much you receive can vary depending on your various incomings including your job, pension, other benefits, and any savings and capital above £6,000.

Income support

Income support has now been replaced by Universal Credit. This means that you can’t make a new claim and if you need financial support you would apply for Universal Credit instead.

Child Benefit

As a parent or guardian, you can claim Child Benefit for the number of children you take care of. It doesn’t matter if you have a job or have savings when claiming Child Benefit, however it’s important to know that if you or your partner earn more than £50,000 you will have to pay some of it back through tax. Depending on how much you earn, you may even have to pay all of it back. This is known as the ‘High Income Child Benefit Charge’.

However, in general, as long as the child is under 16 years old, or aged 16-20 and in education or training, you should be eligible to claim. You’ll be able to claim £21.80 per week for your first child and £14.45 per week for any children after that. Normally, you’ll be paid every 4 weeks.

To apply, you’ll have to complete a claim form and send it to the Child Benefit Office. Even if you’re on other benefits, you’ll still receive the same amount unless the Benefit Cap applies. This refers to when you get Housing Benefit or the housing element of Universal Credit and limits the total amount of benefit you can receive.

Jobseeker’s Allowance (JSA)

Previously, there used to be contribution-based and income-based JSA, but you can’t apply for these anymore. However, if you’re already receiving either of these, then this will carry on until your claim ends or you’re no longer eligible.

Now, there is a ‘new style’ JSA. This benefit is there as financial support when you’re looking for a job. If eligible, you could receive up to £61.05 a week if you’re under the age of 24 and up to £77 if you’re over 25.

There are different processes for JSA in Northern Ireland, which you can find out more about on the NI Direct website.

Does being in debt impact my benefits?

We know that if you’re going through a tough time financially then you might be feeling extra conscious about your incomings and outgoings.

What if I’m in debt and on benefits? Do I still need to pay?  

In short, yes, you do still need to pay back your debt even if you claim benefits. If you have more than one type of debt and are unsure which you should pay off first, you can contact Citizens Advice for help deciding the ones you should be prioritising.

Can I claim benefits to help with debt?

We understand that benefits and debt management can be overwhelming, and you may be wondering whether you can claim benefits to help with your payments. However, there are no benefits designed specifically to help you clear your debt.

If you’re really struggling with problem debt, or failing to keep up with your payments, there are a variety of debt solutions available that may help you. The most common debt solutions include: 

• Debt management plans (DMP)
• Debt relief order (DRO)
• Individual Voluntary Agreement (IVA)
• Bankruptcy
• Settlement offers

It’s important to remember that Lowell cannot put a debt solution in place for you. We also can’t offer advice on which solution is the most suitable for your personal situation. If you think you need a debt solution, you will need to seek advice and assistance first from a specialist, independent organisation like StepChange, who will then work with Lowell on your behalf.

Can I file for bankruptcy if I’m on benefits?

Yes, you can still go bankrupt if you’re on benefits. To declare yourself bankrupt means that you owe more money than the value of the things that you own. Usually, the bankruptcy period lasts 12 months and costs £680 to apply. To find out more about bankruptcy, you can read our handy blog on different types of debt solutions.

What are benefit debt deductions?

Sometimes the Department for Work & Pensions (DWP) can take money from your benefit payments like Universal Credit. These are called ‘benefit debt deductions’.

Can debt impact my benefits?

In short, yes, there are some specific outstanding debts that can impact your benefits. For example, if you’re on Universal Credit then these types of debt could impact your payments:

• Housing costs including rent arrears and service charges
• Utility bills
• Council tax bills
• Child support maintenance
• Universal Credit overpayment
• Other loans and fines

What are benefits overpayments?

Benefits overpayments are a form of debt that can happen if there has been an error with your benefit payments.

This could be a mistake from the Department for Work and Pensions (DWP), if you’ve given the wrong information during the application process, or if your circumstances have changed such as getting a new job or your children legally becoming adults.

What should I do about benefits overpayments?

It’s important to tell your benefits provider if you’re being overpaid as soon as possible so that you can start to repay what you have been overpaid.

If your provider notices before you do, you might receive a letter letting you know. This letter will explain how much you were overpaid per week, how long this has been for as well as the total amount that has been overpaid. If you don’t believe you’ve been overpaid or any of the other details are wrong, you can contact the benefits office to let them know.

Can benefit overpayments be written off?

If you’re finding it difficult to manage your benefit overpayments then you can contact independent organisations such as StepChange for free, impartial advice.

At Lowell, we want to work with you to find the best payment plan that fits around your personal circumstances. If you’re struggling with your Lowell debt, please get in touch with us. Or if you prefer you can get in touch with independent organisations such as Citizens Advice which can offer free, unbiased benefits and debt advice.

For more debt-related guides and information about working with Lowell, take a look at our debt guidance section.

First Published: 31 October, 2022