TIP: If you are struggling because of a drop in earnings you may be able to claim Universal Credit (if you are already getting Tax Credits and / or Housing Benefit, then seek advice form a Benefits Adviser first).
Universal Credit and Workers
Universal Credit can be paid to workers – there’s no limit to how many hours you can work.
How much you get will depend on your circumstances and income.
Universal Credit is a ‘top up’ benefit, so you may be earning too much to qualify.
Each month the DWP will work out your award based on your circumstances at the end of your Assessment Period and the wages you (and any partner) received in that period.
So if your earnings change – so will your Universal Credit award.
Generally for every £1 net you earn your Universal Credit award is reduced by 55p.
You may be entitled to a Work Allowance (see below), if you are, then for every £1 net you earn over your Work Allowance your Universal Credit award is reduced by 55p.
What is a Work Allowance?
If you and/or your partner are in paid work you may be able to earn a certain amount before your Universal Credit payment starts to be affected. This is called a Work Allowance.
The Work Allowance only applies to you if:
- You have responsibility for one or more children (or qualifying young persons) who live with you, or
- You or your partner have a Limited Capability for Work (due to a health condition or disability).
If neither of these circumstances apply to you, your Universal Credit payments will be affected as soon as you start earning money from paid work.
There are two Work Allowance rates. Which one you get depends on whether your Universal Credit payment includes help with housing costs ie a Housing Costs Element:
| Situation | UC does include housing costs | UC does not include housing costs |
| Single claimant – no children | £nil | £nil |
| Lone Parent | £404 | £673 |
| Single claimant – Limited Capability for Work | £404 | £673 |
| Couples – no children | £nil | £nil |
| Couple – with children | £404 | £673 |
| Couples – one or both Limited Capability for Work | £404 | £673 |
Example:
Maria earns £1100.00 a month gross, but after National Insurance, tax and her pension contribution this reduces to £1084.89 a month net. She has 3 children and pays rent so she’s entitled to a Work Allowance of £404. This leaves £680.89 a month £680.89 x 55% = £374.48. So her UC award is reduced by £374.48, not by her gross wage of £1100.00.
Monthly Assessments
When your Universal Credit is assessed at the end of each of your Assessment Periods, the DWP will use the wages / earnings you received during that Assessment Period.
If you are an employee then the DWP use a feed from HMRC (called the RTI feed) – this tells them what earnings your employer has paid you for each of your Assessment Periods.
This means that if you work a few hours extra or have some days off sick, the DWP will automatically know and will take the higher/lower wage into account.
But because Assessment Periods are periods of a month then the frequency of your pay could mean that a different amount of earnings are used each Assessment Period even if your wages stay the same.
If you are paid weekly
If you are paid every week, you will usually have 4 payments from earnings in a monthly Assessment Period. But 4 times a year you will get 5 payments from earnings in a single Assessment Period.
If you are paid every 2 weeks
If you are paid every 2 weeks, you will usually get 2 payments from earnings in a monthly Assessment Period. But twice a year you will get 3 payments from earnings in a single Assessment Period.
If you are paid every 4 weeks
If you are paid every 4 weeks, you will usually get 1 payment of earnings in a monthly Assessment Period. But once a year you will receive 2 payments from earnings in a single Assessment Period.
If you are paid every month
Normally this doesn’t cause any problems as there will be 12 months that you get paid so you should only have 1 pay day in each Assessment Period. But where the end of your Assessment Period falls near to the date you are normally paid by your employer there is a chance of you having 2 pay days in one Assessment Period. This is because if your wages are due at the weekend your employer will pay you early – and this may mean that pay falls into an earlier Assessment Period than normal.
In the Assessment Period where the total earnings figure used by the DWP is higher than usual, you will get a smaller Universal Credit payment. You will need to make sure that you have managed your money to be able to cope with this smaller payment.
Example:
Sharon works at a local bakery. She gets paid weekly – the amount never changes. However every few months she gets paid 5 wages in one of her Universal Credit Assessment Periods and for that month her Universal Credit award drops. She found it difficult to budget at first, but now makes sure her rent and other bills are paid each week out of her wage and does a big shop when she gets her Universal Credit payments – that way she makes sure she doesn’t get into debt.
If this happened because your normal payday fell at a weekend or bank holiday and so you received your earnings early, you can ask the DWP to ‘move’ the payment to the usual month.
NOTE: If you think the DWP have got your wages wrong then see I don’t agree with the wage figures used.
My Universal Credit award has dropped to nil due to my earnings…
As your income increases, your payment will reduce until you’re earning enough to no longer be awarded Universal Credit. Your payment will then be stopped. You’ll be told when this happens.
However if your circumstances change within 6 months of your last Universal Credit payment (for example, if your earnings go down or a change in your personal circumstances which means you need more help) payments should re-start automatically – however you should always check that your Universal Credit claim is still live and if not re-apply. Just log into your online account and, if asked, confirm that the details you gave before are correct. You will keep your original payment dates.
If this is done more than 6 months after your last Universal Credit payment you will need to make a new claim.
I’m self-employed
If you are self-employed, then special rules apply to you – see What if I’m self-employed?
I’m 67 and getting a state pension and some Housing Benefit – will I have to claim?
“I’d been getting Tax Credits to top up my wages. After talking to a Benefits Adviser I discovered I’d be better off on Universal Credit – they even helped me choose the best date to claim.”