How does Universal Credit work for workers?

TIP: If you are struggling because of a drop in earnings you may be able to claim Universal Credit (if you are already getting Tax Credits and / or Housing Benefit, then seek advice form a Benefits Adviser first).

Universal Credit and Workers

Universal Credit can be paid to workers – there’s no limit to how many hours you can work.

How much you get will depend on your circumstances and income.

Universal Credit is a ‘top up’ benefit, so you may be earning too much to qualify.

Each month the DWP will work out your award based on your circumstances at the end of your Assessment Period and the wages you (and any partner) received in that period.

So if your earnings change – so will your Universal Credit award.

For every £1 net you earn over any work allowance your Universal Credit reduces by 63p.

What is a Work Allowance?

If you and/or your partner are in paid work you may be able to earn a certain amount before your Universal Credit payment starts to be affected. This is called a Work Allowance.

Once you earn more than your work allowance your Universal Credit payments will be reduced at a percentage rate. This is known as the Universal Credit earnings taper.

The Universal Credit earnings taper rate is currently 63%. This means that for every £1 you earn over your work allowance (if you are eligible for one) your Universal Credit will be reduced by 63p. this amount will be deducted automatically from your Universal Credit payment.

The Work Allowance only applies to you if:

  • You have responsibility for one or more children (or qualifying young persons), or
  • You or your partner have limited capability for work (due to a health condition or disability)

If neither of these circumstances apply to you, your Universal Credit payments will be affected as soon as you start earning money from paid work.

There are two Work Allowance rates. Which one you get depends on whether your Universal Credit payment includes help with housing costs:

Situation UC does include
housing costs
UC does not include
housing costs
Single claimant – no children £nil £nil
Lone Parent £292 £512
Single claimant – Limited Capability for Work £292 £512
Couples – no children £nil £nil
Couple – with children £292 £512
Couples – one or both Limited Capability for Work £292 £512
     

Example:
Maria earns £1100.00 a month gross, but after the DWP have deducted National Insurance, tax and her pension contribution this reduced to £992.00 a month net.
She has three children and pays rent so she’s entitled to a work allowance of £292. This leaves £700.00 a month.
£700 X 63% = £441.00.
So her UC award is reduced by £441.00, not by her gross wage of £1100.00.

Monthly Assessments

When your Universal Credit is assessed at the end of each of your Assessment Periods, the DWP will use the wages / earnings you received during that Assessment Period.

If you are an employee then the DWP use a feed from HMRC (called the RTI feed) – this tells them what earnings your employer has paid you for each of your Assessment Periods.

This means that if you work a few hours extra or have some days off sick, the DWP will automatically know and will take the higher/lower wage into account.

But because Assessment Periods are periods of a month then the frequency of your pay could mean that a different amount of earnings are used each Assessment Period even if your wages stay the same.

If you are paid weekly
If you are paid every week, you will usually have 4 payments from earnings in a monthly Assessment Period. But 4 times a year you will get 5 payments from earnings in a single Assessment Period.

If you are paid every 2 weeks
If you are paid every 2 weeks, you will usually get 2 payments from earnings in a monthly Assessment Period. But twice a year you will get 3 payments from earnings in a single Assessment Period.

If you are paid every 4 weeks
If you are paid every 4 weeks, you will usually get 1 payment of earnings in a monthly Assessment Period. But once a year you will receive 2 payments from earnings in a single Assessment Period.

If you are paid every month
Normally this doesn’t cause any problems as there will be 12 months that you get paid so you should only have 1 pay day in each assessment period. But where the end of your Assessment Period falls near to the date you are normally paid by your employer there is a chance of you having 2 pay days in one Assessment Period. This is because if your wages are due at the weekend your employer will pay you early – and this may mean that pay falls into an earlier Assessment Period than normal.

In the Assessment Period where the total earnings figure used by the DWP is higher than usual, you will get a smaller Universal Credit payment. You will need to make sure that you have managed your money to be able to cope with this smaller payment.

If this happened because payday was on a weekend or bank holiday, you can ask the DWP to ‘move’ the payment to the usual month.

Example:
Sharon works at a local bakery. She gets paid weekly – the amount never changes. However every few months she gets paid 5 wages in one of her Universal Credit Assessment Periods and for that month her Universal Credit award drops. She found it difficult to budget at first, but now makes sure her rent and other bills are paid each week out of her wage and does a big shop when she gets her Universal Credit payments – that way she makes sure she doesn’t get into debt.

IMPORTANT: It may be the case that your extra payment means that you earn enough that month to receive no Universal Credit payment at all. You should them make sure you reclaim Universal Credit to re-start your payments – see below.

NOTE: If you think the DWP have got your wages wrong then see I don’t agree with the wage figures used.

My Universal Credit award has dropped to nil due to my earnings…

As your income increases, your payment will reduce until you’re earning enough to no longer be awarded Universal Credit. Your payment will then be stopped and your Universal Credit claim will be closed. You’ll be told when this happens.

If your circumstances change within 6 months of your last Universal Credit payment (for example, if your earnings go down or a change in your personal circumstances which means you need more help) it’s easy to re-apply. You’ll usually just need to log into your online account and confirm that the details you gave before are correct. You will keep your original payment dates.

If this is done more than 6 months after your last Universal Credit payment you will need to make a new claim.

I’m self-employed

If you are self-employed, then special rules apply to you – see What if I’m self-employed?

Frequently Asked Questions