Universal Credit taper rate: What is the Universal Credit taper rate?

Martin Lewis gives job hunter universal credit advice

Universal Credit is only paid to eligible individuals who meet certain requirements. For people on a low income, their earnings may affect how much they receive. The taper rate is the calculation used to set how much benefits a claimant loses based on their earnings. Express.co.uk has compiled a guide to explain what the Universal Credit taper rate is and how it works.

What is Universal Credit?

Universal Credit is a relatively new benefit payment which is given to eligible recipients on a monthly or bimonthly basis to help them with the cost of living.

The payment is designed to support individuals who are out of work or on a low income.

Universal Credit replaced these payments, which are called legacy benefits by the Department for Work and Pensions:

  • Income support
  • Working tax credit
  • Income-based jobseeker’s allowance (JSA)
  • Income-related employment and support allowance (ESA)
  • Housing benefit
  • Child tax credit.

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Universal Credit is available to anyone of working age who is out of work, unable to work or on a low income.

To be eligible individuals must be:

  • 18 or over (although some under 18s can claim Universal Credit)
  • In Great Britain
  • Out of education (although some people in education can claim Universal Credit)
  • Able to accept a claimant commitment.

Universal Credit recipients are permitted to work, but the amount of money a person is allowed to earn before their Universal Credit payment is affected is called the work allowance.

Individuals are entitled to a work allowance if they are responsible for dependent children and/or cannot work as much due to illness or a disability.

Those entitled to the work allowance can earn up to a set threshold depending on one’s circumstances.

Universal Credit payments are reduced at this set rate which is called the earnings taper.

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What is the Universal Credit taper rate?

The Universal Credit earnings taper rate is the rate at which a reduction to your Universal Credit based upon your earned income.

The earnings taper rate is currently 63 percent.

This means for every pound you earn above your work allowance, your Universal Credit will be reduced by 63p.

How to work out how the taper rate will impact your income

First, you will need to understand if your Universal Credit award will be affected by the earnings taper.

The monthly work allowances are set by the Government each year.

Single person/couples responsible for one or more children or qualifying young persons without Housing Support: £512.

Single person/couples with a limited capability for work including Housing Support: £292.

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.

To calculate the earnings taper which applies to your award you should undertake the following:

  • Take your total monthly earnings figure after tax, National Insurance and relevant pension contributions which have been removed
  • Deduct your monthly work allowance, if you are eligible for one
  • Apply the taper rate by multiplying your remaining earnings by 0.63.
  • This is the amount which will be deducted from your Universal Credit maximum amount when calculating your award.

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