With Universal Credit, we keep what we earn from work and still get benefits, making us hundreds of pounds better off
It’s designed to be “tapered”, which means as earnings go up, payments only gradually come down. So For every £1 earned (after tax), Universal Credit is reduced by 55p.
Some of us get to keep a chunk of our wages first. If we have children, or limited ability to work, we may qualify for a work allowance. That means we can earn a set amount each month before any deductions are made.
Work allowance
Work allowances apply if a claimant either cares for at least one child (or dependent, ‘qualifying’, young person) or has limited capability for work. For joint claimants, where partners are both on UC, only one can claim the work allowance. The level is the same as for a single claimant.
There are two levels:
- Lower work allowance: if our Universal Credit includes help with rent
- £427 per month
- Higher work allowance: if it does not include help with rent
- £710 per month
Only earnings above this amount are reduced by the 55p taper. If we don’t qualify for a work allowance, the taper usually applies from the first pound we earn.
The work allowance is usually changed each April – we can see the latest allowances online at GOV.UK.
Work it out
This can be complicated, and the allowances may change, so talk it through with an adviser.
But we can also use an online calculator to see how much better off we would be as our earnings increase. An online calculator can help show what actually happens as earnings change.
Tools like EntitledTo better off calculators let us plug in hours and pay, then try different scenarios to see how much extra we’d really have.
At the end it estimates how much UC you would be getting. Further down the page it says: “How are your benefits affected by working different hours?” If we are working already, plug in how many hours and the rate of pay, and make a note of it. Try different amounts and see how much extra we’d have. This can get complicated, and the exact amounts depend on individual circumstances.
For more help with specific Universal Credit questions, visit our Useful Links page and be directed to the right support for you.
Image: Wavebreak Media / Shutterstock
