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Coronavirus: Universal Credit - Earnings Limit
Universal Credit - Earnings Limit
What is the Earnings Limit for UC?

Universal Credit is a means tested benefit – so it’s all down to the claimant’s personal circumstances and income.

NOTE: when it’s a couple claim – ‘claimant’ refers to both members of the couple.

NOTE: The illustrative examples below are based on the figures for 2021/22.

The Calculation

As UC is a means tested benefit, the first stage of the calculation is to work out the ‘Maximum UC’ the claimant could be entitled to: this represents the minimum level of income the government feels they need given their personal circumstances.

The ‘Maximum UC’ includes: amounts for household members (themselves and any dependent children); Elements for specific situations (e.g. carer, disabled child, limited capability for work/work related activity, child care costs); and a Housing Costs Element if the claimant is liable to pay rent.

All of the Elements to which the claimant is entitled are added together to work out what their ‘Maximum UC’ will be. This is then reduced by any earnings and/or assessable unearned income the claimant has, until the income is high enough to mean there is no entitlement left. 

This means that the higher a claimant’s Maximum UC amount, the more they can earn and still have an entitlement. 

Whilst on UC, this assessment is made every month, based on the claimant’s circumstances at the end of their Monthly Assessment Period (MAP).

Do earnings reduce the award £1 for £1?

No. The DWP will take account of the net wages (gross wage less tax, NI and pension contributions) received during the claimant’s Monthly Assessment Period (MAP). These will reduce the claimant’s ‘Maximum UC’ by 63p for each £1 above the claimant’s applicable ‘work allowance’ (earnings disregard).

A claimant is eligible for a ‘work allowance’ if they are responsible for children who live with them, or if they (or their partner) have been found to have, or are treated as having, a limited capability for work or work related activity. A claimant who is 'self-isolating' on the last day of their Monthly Assessment Period and has provided an 'isolation note' should be treated as having a limited capability for work (as they have been prevented by law from working due to having or having been in contact with a person who has a 'notifiable disease'). 

There are two levels of ‘work allowance’: the lower level is for those claimants who qualify and whose ‘Maximum UC’ includes a Housing Costs Element (£293); the higher level is for claimants whose ‘Maximum UC’ doesn’t include a Housing Costs Element (£515): this takes into account the fact that they may have a mortgage to pay.
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So how much can someone earn?

That all depends on their ‘Maximum UC’ and whether or not they qualify for a ‘work allowance’. 

A couple aged over 25, with 2 children born before April 2017, and £500 eligible housing costs, would stop being entitled to UC when they earned £2858.33 net a month or around £47,500 gross pa (assuming just one of them is working).

Whereas a single 24 year old with no rent to pay would stop being entitled to UC once they earned £546.03 net a month! 

So how much someone can earn varies very much according to their circumstances - the best thing is to use one of the free UC calculators that are available online or contact a benefits adviser.

How to work out the maximum someone can earn (net) and still be entitled to UC
You can use the following formulas>

No unearned income, entitled to a work allowance:
(Maximum UC + 63% of any work allowance) divided by 63%.

No unearned income, not entitled to a work allowance:
Maximum UC divided by 63%.

Unearned income, entitled to a work allowance:
(Maximum UC – unearned income monthly figure + 63% of any work allowance) divided by 63%.

Unearned income, not entitled to a work allowance:
(Maximum UC – unearned income monthly figure) divided by 63%.

Illustrative Examples:
The following table assumes that the claimant has no unearned income and that their Maximum UC includes a Housing Costs Element ie they are responsible for paying rent. 

NOTE: The maximum salary that someone could receive before UC ends would be higher with a higher Housing Costs Element ie higher eligible rent figure than that mentioned.

Household

Max net  monthly earnings before entitlement to UC is nil

 

Estimated max gross  annual salary before entitlement to UC is nil*

Single, under 25 year old, £300 eligible housing costs, no extra elements

£1022/22 net

£12,650 gross

Single, over 25 year old, £300 eligible housing costs, no extra elements

£1129.38 net

£14,550 gross

Single, over 25, Limited Capability for Work (pre April 17) and £300 housing costs

£1626.96 net

£23,500 gross

Couple, over 25, no children, no extra elements, £500 eligible housing costs

£1740.60 net

£25,500 gross

Single parent, over 25, with one child born before April 2017, no other elements and £500 eligible housing costs.

£2188.25 net

£33,3000gross

Couple aged over 25, with 2 children born before April 2017, no other elements and £500 eligible housing costs.

£2858.33 net

£45,000 gross

Couple aged over 25, with 3 children born before April 2017, one lower disabled child premium, one carer addition, and £600 eligible housing costs.

£3857.86 net

£65,000 gross

Couple, over 25, 4 children born before April 2017, one higher disabled child premium, one carer addition, one Limited Capability for Work Related Activity element, £500 eligible housing costs

£5055.05 net

£89,500 gross

* Assumes one earner per family with basic tax code ie no deductions other than tax and NI.

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