Universal Credit: What are the rules around working?

Universal Credit: Expert discusses benefits of claiming

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Universal Credit is provided by the Department for Work and Pensions (DWP) and many Britons are not aware that the support can be claimed even if a person is working. Currently, more than 5.8 million people across England, Scotland and Wales are claiming Universal Credit. Around 40 percent of those claiming are working or have a form of earning. 

People are able to apply to receive Universal Credit if they’re out of work or on a low-income, live in the UK, are over the age of 18 years, are under the state pension age, and have less than £16,000 in savings.

Under the current legislation, a person who claims Universal Credit but still works will have their payment affected by how much they earn. 

For every £1 a person earns, their Universal Credit will be reduced by 55p, this is called the earnings taper.

A person’s employer benefits such as maternity or paternity pay, adoption leave and sick pay are all classed as earnings and are affected by the taper. 

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There is no limit to the amount a person can work whilst claiming Universal Credit unlike other existing benefits such as Income Support or Working Tax Credits.

Some people can be eligible for the “work allowance”; this means they can earn more from earnings before their Universal Credit can be affected.

To qualify for the work allowance, a person must be in paid employment and responsible for a dependent child, or be unable to work as much because of an illness or disability.

In 2022-23, the monthly work allowance is set at £344 if a person’s Universal Credit includes housing support, and at £573 if it doesn’t. 

Last year, the former Chancellor Rishi Sunak cut the Universal Credit taper rate and work allowance from 63p to 55p which aimed to help Britons receiving the benefit be better off.

This means that for every £1 a person works over their work allowance, if they have one, Universal Credit will reduce by 55p rather than 63p.

People can check how their earnings can impact their Universal Credit Payment using the Universal Credit calculator which can be found on the Government’s website. 

Some income that people didn’t earn from working can also be deducted from their Universal Credit award, this is called unearned income.

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If people claim other benefits such as new style Jobseeker’s Allowance (JSA), new style Employment and Support Allowance (ESA), Carer’s Allowance, or pension income it can be deducted from a person’s monthly Universal Credit payment. 

Usually, £1 will be deducted from the Universal Credit payment for every £1 of unearned income, however, this can be different depending on what the unearned income is. 

Unearned income that won’t be taken off Universal Credit payment includes things such as: Child Benefit; child maintenance payments; Disability Living Allowance (DLA); Personal Independence Payment (PIP); or income from boarders and lodgers.

Universal Credit is usually paid once a month and is made up of a basic “standard allowance” for a household.

In 2022-23, the standard amount is £265.31 a month for single claimants under 25, and £334.91 a month for single claimants aged 25 or over.

Joint claimants under 25 receive a standard allowance of £416.45 and for those over 25 years it’s £525.72.

In the mini-budget in September, former Chancellor Kwasi Kwarteng announced that part-time workers are to have their Universal Credit payments reduced if they do not take daily “active steps” to find more work.

According to Universal Credit rules, people claiming whilst working a job at the national minimum wage are required to meet regularly with their job centre coach to help them increase their working hours. 

Before the change, the rules said it was for those working nine hours a week, however, since September 26, this was increased to 12 hours a week. 

It will further increase to 15 hours a week from January 2023.

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