Universal Credit (UC) is a working age benefit and is aimed to allow a seamless transition for those moving in and out of work. As you earn more, or less, your UC will be adjusted accordingly without the need to make a new claim for a different benefit.

 

Whether you are in or out of work your total UC elements will stay the same with the award being reduced by the deduction for wages. So unlike legacy benefits, you'll continue to receive the rent element as part of your claim.

 

Your income from wages is used to calculate a deduction for wages, which will reduce the overall amount of UC you will receive. If you have an employer, they will report your wages to HMRC through the RTI feed and Universal Credit use this to adjust your entitlement each month, meaning you do not need to report wages yourself. This is different for Universal Credit claimants that are self-employed.

NOTE: It is important to remember that UC is paid in arrears and depending on your assessment period dates the wages counted could be from the previous month.  

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Reporting changes to work

It's important to report any changes to your work status to UC as reporting changes is part of everyone's claimant commitment.

 

You will need to report:

• Starting employment

• Leaving employment

• Changes in hours you work (increasing or decreasing)

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If you are working when you first claim UC or start work while claiming, this should be reported to UC under ‘work and earnings’. UC will need to know if you are employed or self-employed, full or part time and whether this is a temporary or permanent job. You will also report usual hours worked and your expected wage (they will not ask who your employer is). If you change the number of hours you work this should be reported to UC under report a change, work and earnings. 

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Work allowance

A work allowance is the amount you can earn before UC make deductions to your award based on your earnings and is the same for single and joint claimants and also applies to self-employed people.

NOTE: Not everyone has a work allowance. Only those who have children, LCW or LCWRA qualify for a work allowance.

 

If you meet the criteria and have housing cost element as part of your UC claim, your work allowance is £404 (this was £379, prior to 8/4/24).

If you meet the criteria and don’t have housing costs element as part of your UC claim, your allowance is £673 (this was £631, prior to 8/4/24).

If you are on a joint claim and entitled to a work allowance, you still only receive one work allowance and it is applied to the total income from your combined earnings.

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Deductions for wages

As an income-related benefit, your earnings will be taken into account when calculating your Universal Credit award. To calculate the deduction for wages you can use our handy calculator tool.

 

It is good to learn how to work this out manually as well. 

 

If you have a work allowance you can calculate the deduction for earnings like this:

Total wages received in assessment period minus work allowance (if applicable) = X

X multiplied by 0.55 = deduction

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Example: You earn 1000 and have housing element and a child on your UC award so your work allowance is £335.

 

1000 (earnings) - 404 (work allowance) = 596

596 x 0.55 = 327.80

So £327.80 would be deducted from your total UC award based on your £1000 wages.

 

If you don’t have a work allowance then you can calculate the deduction for earnings like this: 

Total wages received in assessment period multiplied by 0.55 = deduction

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Example: You earn £600 in an assessment period.

600 x 0.55 = 330

So £330 would be deducted from your total UC award based on your £600 wages.

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Occasionally you may find that UC have used more (or less) wages than you have earned in an assessment period, we have more information on how to deal with this.

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