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Universal Credit (UC) income and capital

This guide explains more about the rules relating to income and capital for Universal Credit (UC)

1. Universal Credit (UC): Earnings

In working out the effect your net earnings and other income will have on your Universal Credit award there are two important terms: Work Allowance and Taper Rate. Earnings below your work allowance are ignored. Earnings over your work allowance will be subject to a taper of 63%.

Work Allowance

This is 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 and whether your maximum Universal Credit award contains a Housing Costs element.

Do I qualify for a Work Allowance?

You can get a work allowance if you (and/or your partner) either:

•  have responsibility for a child and/or
•  have a limited capability for work due to illness or disability.

The monthly work allowances are set at:

Claimant Higher Work Allowance (no housing costs) Lower Work Allowance (housing costs)
Single Responsible for one or more children or qualifying young persons £503  £287
Single Has limited capability for work £503  £287
Couple Responsible for one or more children or qualifying young persons £503 £287
Couple Has limited capability for work £503 £287

If your maximum Universal Credit award contains a Housing Costs element, your work allowance will be the lower work allowance in the table below. If it doesn't, your work allowance will be the higher work allowance.

If you are a member of a couple, but have to make a claim as a single person, your work allowance is still the amount for couples.

If you have earnings but you (or your partner) are not responsible for a child or do not have limited capability for work you will not be eligible for a work allowance.

Taper rate

The taper rate is the rate at which your maximum Universal Credit award is reduced as your earnings increase.

A taper rate of 63% means losing 63p of your maximum Universal Credit award for every £1 you earn over your work allowance.

Your earnings will be assessed monthly to ensure your Universal Credit 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.

 

Updated: April 2019

 

2. Universal Credit (UC) income: Self-employed earnings

If you are self-employed the work allowance and taper rate are the same as for employed people, however, a 'minimum income floor' can be used if you are self-employed.

Minimum income floor

When you are self-employed and you claim Universal Credit, you are treated as if you are earning a certain amount. This amount is called the 'minimum income floor'. If the minimum income floor applies to you and you earn below this level in any month, you are treated as earning the minimum income floor. If you are earning more than the minimum income floor, your actual earnings are taken into account instead.

The minimum income floor is the equivalent of someone working full time (35 hours per week unless you have other responsibilities) on the National Minimum Wage for your age group.

Example: John is a self-employed taxi driver aged 35. He has a slow month and only earns  £800. His minimum income floor is £8.21 (National Minimum Wage for 25+ year olds) x 35 (hours per week) x 52 (weeks) ÷ 12 (months) = £1245.18 per month. This amount would be used to determine his Universal Credit payment for that month, rather than his actual earnings of £800.

Another example: Sally is a self-employed hairdresser aged 24. In her claimant commitment, she has agreed that she can work a maximum of 25 hours per week because she has to look after her son before and after school. She has a good month and earns £850. Her minimum income floor is £7.70 (National Minimum Wage for 21/24 year olds) x 25 (hours per week) x 52 (weeks) ÷ 12 months = £834.17 per month. Sally's Universal Credit payment that month would be calculated using her actual earnings of £850 rather than her minimum income floor.

Start up period

If you start a business whilst you are claiming Universal Credit, the minimum income floor will not apply to you for the first 12 months. This 'start up period' gives you a chance to grow your business. In the start up period, your Universal Credit payment is calculated based on your actual earnings even if they are lower than your minimum income floor. 

You get a 12 month start up period for the first 12 months of your Universal Credit claim if you started your business less than one year before you started your claim. You can only have one start up period for each business and you can only have one start up period in every five years.

Proof of self-employed earnings

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.

 

Updated: April 2019

3. Universal Credit (UC) income: 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:

 

Updated: April 2018

4. Universal Credit (UC): 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. So 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 taken into account.