What is the Earnings Limit for UC?
Universal Credit is a means tested benefit – so it’s all down to the claimant’s personal circumstances and income.
NOTE: when it’s a couple claim – ‘claimant’ refers to both members of the couple.
NOTE: Illustrative examples figures are based on 2020/21 rates.
As UC is a means tested benefit, the first stage of the calculation is to work out the ‘Maximum UC’ the claimant could be entitled to: this represents the minimum level of income the government feels they need given their personal circumstances.
The ‘Maximum UC’ amount includes: amounts for household members (themselves and any dependent children); Elements for specific situations (e.g. carer, disabled child, limited capability for work/work related activity, child care costs); and a Housing Costs Element if the claimant is liable to pay rent.
All of the Elements to which the claimant is entitled are added together to work out what their ‘Maximum UC’ will be. This is then reduced by any earnings and/or unearned income the claimant has, until the income is high enough to mean there is no entitlement left.
This means that the higher a claimant’s Maximum UC amount, the more they can earn and still have an entitlement.
This assessment is made every month, based on the claimant’s circumstances at the end of the monthly assessment period (MAP).
Do earnings reduce the award £1 for £1?
No. The DWP will take account of the net wages received during the claimant’s MAP. These will reduce the claimant’s ‘Maximum UC’ by 63p for each £1 above the claimant’s applicable ‘work allowance’ (earnings disregard).
A claimant is eligible for a ‘work allowance’ if they are responsible for children who live with them, or if they have been found to have, or are treated as having, a limited capability for work or work related activity. A claimant who is self-isolating on the last day of their Monthly Assessment Period should be treated as having a limited capability for work.
There are two levels of ‘work allowance’: the lower level is for those claimants who qualify and whose ‘Maximum UC’ includes a Housing Costs Element (£292); the higher level is for claimants whose ‘Maximum UC’ doesn’t include a Housing Costs Element (£512): this takes into account the fact that they may have a mortgage to pay.
So how much can someone earn?
That all depends on their ‘Maximum UC’ and whether or not they qualify for a ‘work allowance’. A couple aged over 25, with 2 children born before April 2017, and £500 eligible housing costs, would stop being entitled to UC when they earned £2680.00 net a month or around £42,000 gross pa (assuming just one of them is working).
Whereas a single 24 year old with no rent to pay would stop being entitled to UC once he earned £400 net a month!
Examples: The following table assumes that the claimant has no unearned income and that their Maximum UC includes a Housing Costs Element.
The maximum salary that someone could receive before UC ends would be higher with a higher Housing Costs Element
|Household||Max net monthly earnings before entitlement to UC is nil||Estimated max gross annual salary before entitlement to UC is nil*|
|Single, under 25 year old, £300 eligible housing costs, no extra elements||£1020.19 net||£12,600 gross|
|Single, over 25 year old, £300 eligible housing costs, no extra elements||£1126.81 net||£14,700 gross|
|Single, over 25, Limited Capability for Work (pre April 17) and £300 housing costs||£1622.38 net||£23,500 gross|
|Couple, over 25, no children, no extra elements, £500 eligible housing costs||£1736.57 net||£25,500 gross|
|Single parent, over 25, with one child born before April 2017, no other elements and £500 eligible housing costs.||£2182.70 net||£32,850 gross|
|Couple aged over 25, with 2 children born before April 2017, no other elements and £500 eligible housing costs.||£2849.33 net||£45,000 gross|
|Couple aged over 25, with 3 children born before April 2017, one lower disabled child premium, one carer addition, and £600 eligible housing costs.||£3844.57 net||£64,250 gross|
|Couple, over 25, 4 children born before April 2017, one higher disabled child premium, one carer addition, one LCWRA element, £500 eligible housing costs||£5034.71 net||£89,000 gross|
|* Assumes one earner per family with basic tax code ie no deductions|