LITRG highlights savings opportunity for new universal credit claimants

The Help to Save account aims to encourage individuals on a low income to build up their short-term savings and encourage them to form a regular savings habit. It is open to certain claimants of tax credits and universal credit.¹

In order to open a Help to Save account, you must meet certain eligibility conditions at that point. Once the account is opened, you remain eligible for the scheme for four years even if you cease to meet those conditions, for example if you only claim universal credit for a short period (although there are certain restrictions if you later leave the UK).

The Help to Save account pays a tax-free bonus on the second and fourth anniversaries of the date the account was opened. But the amount which can be saved is limited to £50 per calendar month. If an individual saves the maximum amount of £2,400 over the account’s four-year life without making any withdrawals, they will receive bonuses totalling £1,200.

Victoria Todd, Head of LITRG, said:

“Saving spare cash may be the last thing on people’s minds in the current circumstances but new claimants of universal credit should give some thought to opening a Help to Save account if they are eligible to do so.

“While such individuals may not be in a position to save at the moment, the account remains open for four years from the point it is opened. Therefore, it may be possible to take advantage of the scheme when financial circumstances improve and such individuals might no longer be claiming universal credit. For those who claim universal credit as part of a couple, each partner can apply for their own Help to Save account if the eligibility conditions are met, further increasing the potential bonus payable.

“We hope that the coronavirus pandemic, and its effect on people’s livelihoods, lasts no longer than necessary. The Help to Save scheme may provide individuals and families a much-needed boost to replenish their savings pots and to help re-stabilise their short-term financial security.”

^{Notes for editors}
1. In order to be eligible to open a Help to Save account, first you must be in the UK and you cannot have previously opened a Help to Save account. You must also either:
● be entitled to working tax credit and actually receiving either working tax credit or child tax credit payments, or
​● be receiving universal credit and have earned income of at least 16 hours a week at the national living wage (from 1 April 2020, this is equivalent to £604.56 in a month) in your previous assessment period.
https://www.gov.uk/get-help-savings-low-income/eligibility
Note here that ‘earned income’ means the same as it does for universal credit purposes. Payments made to employees furloughed under the Coronavirus Job Retention Scheme and traders under the Self-Employment Income Support Scheme will be treated as earnings, so such amounts will count towards the Help to Save earnings eligibility requirement for universal credit claimants. 
2. See https://www.gov.uk/hmrc-internal-manuals/help-save-technical/hstm02000 ^{for detailed rules}
3. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes. 
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact CIOT External Relations on 0207 340 2702 / Out of hours contact: George Crozier, 07740 477 374