What are the surplus earning rules?

CORONAVIRUS: Many self-employed workers will be entitled to receive a lump sum from the government under their Self-Employed Income Support Scheme. These need to be reported to the DWP as income in the Assessment Period received. This could mean that they have surplus earnings.
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Surplus Earning Rules

The Universal Credit ‘surplus earnings’ rules affect certain ‘high’ earners. They apply to both employed and self-employed workers.

A Universal Credit claimant whose earnings are too high to entitle them to Universal Credit in an Assessment Period, will, in certain circumstances, have some of those earnings taken into account when they make a reclaim for Universal Credit within six months.

The level at which a claimant will be deemed to have ‘Surplus Earnings’ has been deliberately set at a high figure in order to limit the number of cases affected and to enable the DWP to test and learn from the new arrangements. However this will be reviewed in 2021.

Any ‘Surplus Earnings’ a claimant is deemed to have is added to any other earnings when working out whether or not they are entitled to Universal Credit when they make a reclaim, and when working out how much they are entitled to.

Who will be affected?

Only a small number of Universal Credit claimants will be affected.

If you earn more than £2,500 in one Assessment Period over the amount you can earn before your award is reduced to nil, you are said to have ‘surplus earnings’. When you restart your claim, these surplus earnings will be taken into account. This may reduce the amount of Universal Credit you receive, or perhaps mean that you can’t get any Universal Credit payment that month.

The Surplus Earnings rules will therefore only affect those claimants making a reclaim after a previous nil award due to a huge spike in their earnings or receiving a large sum from their employer such as:

  • Arrears of pay
  • Large bonus
  • Pay in lieu of notice
  • Lump sum of maternity pay
  • Accrued holiday pay.

It’s important that you make a Universal Credit claim every month even if you think you won’t be able to receive a payment because of surplus earnings from a previous month.

Making the reclaim will reduce the amount of surplus earnings that is taken into account for later months. If you don’t make a reclaim, the amount of surplus earnings that is taken into account will stay the same.

Surplus earnings will stop being taken into account 6 months after they were first received.