Income and Capital
In working out your Universal Credit award, firstly your
maximum award is calculated, then if you have any earnings, other
income, capital or savings, these are taken into account to work
out your actual Universal Credit award.
In working out the effect your net earnings and other income
will have on your UC award there are two important
terms: Work Allowance and Taper Rate.
Work Allowance: The amount of money
that you can earn before your maximum Universal
Credit award starts to be reduced.
Your work allowance is based on your needs so,
for example, a couple with children have a higher work
allowance than a couple without children.
See our Work Allowance rates page to find out your work
Earnings below your work allowance are ignored. Earnings
over your work allowance will be subject to a taper of
Taper Rate: The rate at which your maximum
Universal Credit award is reduced as your earnings
A taper rate of 65% means losing 65p of your maximum
Universal Credit award for every £1 you earn over your work
Your earnings will be assessed monthly to ensure your UC award
is always accurate. The assessment period begins with the first
date of entitlement and will then run from the same date each
month during your award.
Earnings - Self-employed
If you are self-employed the work allowance
and taper rate are the same as for employed earnings, however,
Universal Credit includes a 'minimum income floor' that will be
used for calculating how much you will get if your self-employed
earnings are below a certain level. This level is likely to be
equivalent to the earnings of someone working full time (35 hours
per week unless you have other responsibilities) on the National Minimum Wage for your age group.
If you earn below this level in any month, the minimum income floor
will be used to determine your payments rather than your actual
Example: John is a self-employed taxi driver. He has a slow
month and only earns £800. Using the current National Minimum Wage
of £6.50 for over 21-year olds, the minimum income floor for John
would be £6.50 x 35 (hours) x 52 (weeks) ÷ 12 (months) = £985.83.
As John's earnings are below his minimum income floor this month,
£985.83 would be used to determine John's Universal Credit payment,
rather than his actual earnings of £800.
When you first start up a business you will get a 12 month
'start up period' to grow your business. During this period the
minimum income floor will not apply and you will not have to look
for other paid work, allowing you to focus on your business. You
will be limited to one start up period in every five years.
The minimum income floor will not apply for the first 6 months
if you are already self employed and you are moved from existing
benefits to Universal Credit.
If you are self employed you will have to supply monthly
'cash-in and cash-out' figures to the Department for Work and
Pensions (DWP). If you fail to supply these figures between 7 days
before and 14 days after each month, your Universal Credit payment
will be suspended.
Most unearned income which you could use to meet your
living costs will be taken into account in full, so your maximum
Universal Credit award will be reduced by £1 for every £1 of
Benefit income taken into account:
- Jobseeker's Allowance (contributory)
- Employment and Support Allowance
- Carer's Allowance
- Bereavement Allowance
- Widowed mother's allowance
- Widowed parent's allowance
- Widow's pension
- Maternity Allowance
- Incapacity Benefit
- Severe Disablement Allowance
- Industrial Injuries Benefit - excluding any increase where
constant attendance is needed and for exceptionally severe
Any capital/savings you have under £6,000 is ignored.
Any capital/savings you have between £6,000 and £16,000 is
treated as if it gives you a monthly income of £4.35 for each £250,
or part of £250, regardless of whether it does or not.
Example: If you have £6,300 in a savings
account, £6,000 of it will be ignored and the other £300 will
be treated as giving you a monthly income of £8.70.
If you have capital/savings over £16,000 as a single claimant or
as a couple you will not be entitled to Universal Credit.
If you are a member of a couple but have to make a claim as a
single person, your partner's capital / savings will still be
included in your £16,000 maximum.
Last updated: 10 April 2015