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How Universal Credit is worked out

Universal Credit (UC) is a means-tested benefit, which is paid if your existing income is below a level set by the law. So it's a top-up to any existing income that you have whether you are in or out of work.

UC is paid monthly in arrears, and payment is decided on the income that you have received in your previous assessment period, which is one calendar month. The start date of your assessment period is the date from which you were first entitled to UC.


Maximum Universal Credit

Maximum Universal Credit is what you would get if you had no money at all coming in. It's a set monthly figure which depends upon your circumstances.

UC has allowances for couples, children, disability (for both adults and children) for carers for severely disabled people and for help with child care costs if you are working. The current rates for UC are monthly rates and represent the maximum possible UC payable in a month. The basic element of UC has been increased temporarily, but is due to reduce in October 2021.

Seek advice if you want to know if your UC payment is correct.

Example:

  • Trev is 20 years old and lives alone in a rented flat, he pays £400 per month for this. He is out of work and has no money. His maximum UC is single person £344 (if he was 25 or over this would be £411.51), housing costs £400, total £744 per month

If you start UC as a single person but your situation changes (for instance you move in with your partner), your maximum UC could change. Contact us for full advice.

Example:

  • if Trev moved in with his partner, Kim, who is 21, their maximum UC would be £490.60 plus their housing costs of £400, total £890.60. If one of them was 25 or over, the rate of UC for a couple would be £596.58 monthly

What income counts

If you start work or you become self-employed, your take-home pay (less any pension contributions you make) counts as income for UC.

If you get any benefits or pensions, these will usually count as income too. The only benefits that don't count as income are:

  • Disability Living Allowance
  • Personal Independence Payment
  • Attendance Allowance
  • Constant Attendance Allowance (Industrial Injuries)
  • Child Benefit
  • Guardian's Allowance
  • Child maintenance
  • Fostering allowances and fees (foster children will continue not to count as members of the family)
  • War Pensions

There are special rules for your income if you are a student. Seek advice.

If you receive a personal injury payment or other compensation, seek advice, as these may not affect your UC.

If you have savings

Savings (or any other capital) over £6,000 will affect Universal Credit. For every £250 (or part of £250) that you have over £6,000, you are assumed to have £4.35 per month income. This is not to say you actually get any income from your savings, it's a fixed rule to reduce UC payments if you have savings.

If you have more than £16,000 capital you cannot get UC.

The capital limit is the same whether you are single or a couple.

Example:

  • Trev gets a job and earns £400 take-home a month. He also inherits £10,000 from his uncle. His income for UC will be £400 per month (but not all of this will be counted) and he will also be assumed to have £69.60 per month income from his savings. He hasn't got that income in reality, but it affects his UC

Earnings you can keep before they affect your benefit

There may be a work allowance which means you can earn up to this amount each month without it affecting your UC.

What rate of Work Allowance you get depends upon your circumstances, and there is a higher rate of Work Allowance for people who do not receive any help with housing costs.

This allowance only applies to income you have earned through employment or self-employment.

If you earn over the work allowance, you don't lose UC pound for pound. Your benefit is reduced by 63% of the amount by which your earnings go over the work allowance. This taper only applies to income you have earned through employment or self-employment.

Example:

  • Trev's maximum UC is £890.60 per month (couple rate UC plus rent). He earns £400 per month. His Work Allowance is NIL per month. So his UC will be affected by the £400 of his earnings that exceed the Work Allowance. Only 63% of this counts, however, so £252 of his wages affects his UC. His UC is now £569 (that’s £890.60 less £252, less the £69.60 because of his savings)

Work Allowances still apply to people who are responsible for children or who have limited capability for work (they are ill or disabled).

If you're employed, make sure your employer is reporting your income to Her Majesty's Revenue and Customs.

Universal Credit employs a real-time information system through which your employer can report your monthly wages to HMRC.

This will normally mean that you do not have to report your work income to Universal Credit, but you must report any other changes that may affect your entitlement to UC.

However, some employers may not use the RTI system. If your employer fails to report your income you may be overpaid UC, and any overpayment will be claimed back from you.

If in doubt, seek advice.

Self-employed on UC

If you're self-employed and claiming UC, or you're considering going in to self-employment, seek advice as the rules relating to self-employment are very complex.

Transitional element of UC for people who previously received the Severe Disability Premium

Until 27 January 2021 it was not possible to claim UC if you had a Severe Disability Premium in your previous benefit. This measure has now been replaced by an additional element in UC to compensate those who lose their SDP by moving to UC. Depending upon your circumstances, it may be between £105 a month and £405 a month.

This additional UC element can be reduced or lost if your circumstances change.

Seek advice from us if you're affected by this change.

Universal Credit rates - per assessment period (monthly)

The standard allowance for UC was increased from 6 April 2020 for one year as part of the response to the coronavirus outbreak. This increase has been continued, but only until September 2021. We'll update the figures for October onwards as soon as they are known.

For advice on which of these elements applies to your claim and how the full amount is worked out, contact us:

Adults

Universal Credit rates for adults
AllowanceAmount
Standard allowance - single person 25 plus £411.51 to September 2021
Standard allowance - single person under 25 £344 to September 2021
Standard allowance - couple £596.58 to September 2021
Standard allowance - couple both under 25 £490.60 to September 2021
Limited capability for work element £128.89
Limited capability for work and work-related activity element £343.63
Carer element £163.73

Children and young people

Universal Credit rates for children and young people
AllowanceAmount
first child element £282.50 for claims prior to April 2017
£237.08 for claims after April 2017
second and subsequent child element £237.08
disabled child addition - lower £128.89
disabled child addition - higher £402.41

Plus

Additional Universal Credit rates
AllowanceAmount
Childcare costs element 1 child: maximum £646.35
Childcare costs element 2 or more children: maximum £1,108.04
Deduction from rent for a non-dependant living in the home £75.53

You may only be allowed a UC child element for the first 2 children on your claim. No help may be given with third or subsequent children who were born on or after 6 April 2017. There are exceptions to this policy and some severely disabled people may be able to claim legacy benefits instead of UC. Seek advice.

Work allowances

Higher work allowance - applied if not receiving housing costs. Single and joint claimants:

  • not responsible for a child or qualifying young person £0 per month
  • responsible for one or more children or qualifying young persons and/or has limited capability for work £515 per month

Lower work allowance - applied if receiving housing costs. Single and joint claimants:

  • not responsible for a child or qualifying young person £0 per month
  • responsible for one or more children or qualifying young persons and/or has limited capability for work £293 per month