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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.

Earnings

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 allowance.

Earnings below your work allowance are ignored. Earnings over your work allowance will be subject to a taper of 65%.

 

Taper Rate: The rate at which your maximum Universal Credit award is reduced as your earnings increase.

 

 

A taper rate of 65% means losing 65p of your maximum Universal Credit award for every £1 you earn over your work allowance.

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 earnings.

Example: John is a self-employed taxi driver. He has a slow month and only earns £800. Using the current National Minimum Wage of £6.31 for over 21-year olds, the minimum income floor for each month would be £6.31 x 35 (hours) x 52 (weeks) ÷ 12 (months) = £957.01. This amount would be used to determine his Universal Credit payment for that month, 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.

Unearned Income

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 unearned income.

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
  • Industrial Injuries Benefit - excluding any increase where constant attendance is needed and for exceptionally severe disablement

Capital/Savings

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: 1 April 2013

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