2010 will go down in history as the year a British Government finally tried to get to grips with and make changes to the complex and expensive labyrinth that is the welfare system.  

The benefits and tax credits system is incredibly confusing, not to mention expensive. A dizzying array of contributory, non-contributory and means-tested benefits, allowances, tax credits, grants, pensions and other payments costs the Government over £180 billion each year - more than the budgets of both defence and health.  

Evolving from a 1940's system that was supposed to pay for itself through National Insurance, you fast forward to 2010 and find a welfare system which the majority of the general public do not understand and one which is plagued by criticism for being too easy to claim and open to fraud. 

With the budget announcements Chancellor George Osborne wasted no time in wielding the axe. Parents with children were the big losers. Pensioners got off relatively unscathed. Those on Housing Benefit and Disabled people would be fearful for the future.

The actual planned changes announced in the budget would not kick in instantly. Instead, the changes would be made in phases.

The biggest announcement, and indeed the biggest change to the welfare system, would be the creation of a brand new benefit to replace a range of current benefits. Universal Credit, planned for launch in 2013, will replace benefits such as Jobseekers Allowance, Income Support, Employment & Support Allowance, Child Tax Credit, Working Tax Credit and Housing Benefit. The Government still have a lot of issues to resolve before Universal Credit goes live, so for the time being, the current system will continue to operate, albeit with some changes.

So what are the changes for 2011?

Tax Credits

  • The second income threshold currently used to calculate and award the family element of Child Tax Credit (presently £545 per year) for higher earners will reduce from £50,000 per year to £40,000 from April 2011
  • The £545 family element will also now taper away using the new Tax Credit withdrawal rate of 41% 
  • The Child Tax Credit baby element (currently £545 per year) which is paid when children are under one will no longer exist from April 2011 
  • At present, HMRC use an income disregard of £25,000 when calculating entitlement to tax credits (meaning they can ignore income increases of up to £25,000 from the current tax years’ income when calculating your entitlement). This disregard will be lowered to £10,000 for two years from April 2011. There is therefore a bigger danger of overpayments and it will be important for families to keep HMRC fully updated with their income and circumstances. 
  • The % of eligible Child Care costs that can be covered within Working Tax Credit will be reduced from April 2011 - to 70% instead of 80% 
  • The Child Tax Credit child element (currently £2300 per child) will be INCREASED to £2555 per child

 Child Benefit

  • Child Benefit, which is currently still universal and NOT MEANS-TESTED will be frozen for three years from April 2011, meaning £20.30 for your first or only child and £13.40 for each other child


  • The Basic State Pension will be uprated by 4.6% from April 2011 - meaning a full basic state pension will be £102.15 per week  
  • The Pension Credit Guarantee Credit rates have also been uprated to exceed the basic State Pension cash increase from April 2011.   
  • From April 2011 people aged over 60 will qualify for Working Tax Credit if they work for at least 16 hours a week. 

 Lone Parents

  • Income Support for Lone parents will see an extension to the conditionality rules for those with children aged 5 and above from October 2011. This basically means that many lone parents will need to sign on as Jobseekers and look for full-time work once their youngest child is aged 5 and over.

Expectant Mums

  • The £190 Health in Pregnancy Grant is to be abolished and you'll need to have reached the 25th week of your pregnancy before 1 January 2011 to qualify
  • The £500 Sure Start Maternity Grant will only be able to be claimed for your first child (or children where the first is a multiple birth) from April 2011


  • The Local Housing Allowance will soon be set at the 30th percentile of local rents
  • The deductions made from benefits such as HB/CTB for non-dependents living with you will be increased from April 2011.  
  • From April 2011 Housing Benefit claimants with a disability and a non-resident carer will be entitled to funding for an extra bedroom. 
  • From April 2011, Local Housing Allowance rates will be capped for new HB claimants, although existing claimants will have until January 2012 to move or negotiate a lower rent. The cap amounts will be:

           - £250 per week for a one bedroom property

           - £290 per week for a two bedroom property

           - £340 per week for a three bedroom property

           - £400 per week for four bedrooms or more

  • Funding for Discretionary Housing Payments, where Housing and Council Tax claimants can access additional help for rent and council tax not already covered by Housing & Council Tax Benefit will be increased by £10 million in April 2011

 Disabled People

  • All current Incapacity Claimants will be re-assessed at some point in 2011 - those found to have limited capability for work will claim Employment & Support Allowance. Those found fit for work will need to explore other options, such as Jobseekers Allowance. 
  • From April 2011 the Disability Living Allowance Higher Rate Mobility Component is extended to claimants with a severe visual impairment

 Young people in education

  • Educational Maintenance Allowance (EMA) now closed to new applicants from January 2011

Download the 2011/2012 Benefits and Tax Credits Rates