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Coronavirus: When to claim UC?
When to claim UC?
KEY FACTS:

  • When someone needs to claim Universal Credit they should normally do so as quickly as possible.

  • BUT there are several situations where a claimant could be better off if they actually delay making their claim for Universal Credit. But they should seek advice before doing so to ensure this is the right decision for them. This is particularly true for those due to receive a large payment from work that would count as earnings such as pay in lieu of notice or holiday, and those self-employed workers who are looking to claim UC and due to receive a lump sum payment of 3 months' worth of Self-Employed Income Support Scheme grant.

  • Some people would be worse off if they claimed Universal Credit so ideally they should find out if claiming UC is their best option. This is particularly true for those Tax Credit claimants who have savings of over £16,000 - they will not be entitled to any UC (due to the savings limit) but will not be able to go back onto Tax Credits.

  • Other claimants may actually be better off if they make the claim for Universal Credit prior to finishing work if they are able to do so.

  • The key issue is that any earnings received during a Monthly Assessment Period will be taken into account even where the claimant's employment has been terminated. This is true even where the earnings cover a period prior to the UC claim being made and regardless of how long after the UC claim it is paid. Please see more information below.

 

What counts as final earnings?

Holiday Pay
Holiday pay counts as earnings under UC rules – and will be taken into account as such for the Monthly Assessment Period in which it is paid – whenever this may be.

Payments in lieu of notice
Any pay in lieu of notice counts as earnings under UC rules – and will be taken into account as such for the Monthly Assessment Period in which it is paid – whenever this may be.

Wages paid after termination of employment
Any wages paid after the claimant has finished work will count as earnings under the UC rules – and will be taken into account as such for the Monthly Assessment Period in which it is paid – whenever this may be.

 

Note on Redundancy Payments
Statutory and contractual redundancy payments, whether paid as a lump sum or over a given period, count as capital for UC purposes and not as earnings. So if a redundancy payment takes a claimant’s savings over £16,000, they would not be entitled to UC, and any savings/capital over £6,000 will affect the claimant's award of UC but not on a £1 for £1 basis.
Sometimes DWP incorrectly treat redundancy payments as earnings - so watch out for this.

So is it ever worth a claimant delaying making a claim for UC on finishing work?


Yes, it could be. If the claimant is aware that they are due some pay from work soon after finishing work it could be worth them delaying claiming Universal Credit until after they have received this – they should seek advice.

So two calculations should be done to determine: how much UC would be awarded if the claimant made the claim as soon as they were able to; and how much would be awarded if they waited to ensure these earnings were not taken into account (ie to ensure these earnings were not taken into account in their first Monthly Assessment Period). BUT they must also take into account the UC they have missed out on by delaying making the claim.

 

Example:

Amina has finished work and is expecting a further payment for holiday pay that she is due.  She finishes work on the 1st of the month and was going to claim on the same day but decides to wait until she receives her holiday pay, which would significantly reduce her first UC award.  Her holiday pay arrives on the 8th and she claims Universal Credit on the 9th, meaning her holiday pay is not counted toward her first UC award.

She had worked out that by waiting 8 days to claim she lost out on £245 UC, but that the difference between the amount of UC she would have got had the assessment included her holiday pay and the amount she did actually get was £367. 

Had she only been due a small amount of holiday pay it would probably not have been worth delaying the claim.

 


Frequently Asked Questions

I’ve just been laid off and I’m due some holiday pay - when can I claim Universal Credit?

You can claim immediately, but depending how much holiday pay you are due, and when, you may be better off delaying your claim until you receive it. If you are due a significant amount of holiday pay in the next few days / couple of weeks, then it is more likely that it would be better to delay the claim until after you receive this payment. This is because this payment from your employer will reduce your UC award.
If you are entitled to a work allowance and the amount of holiday pay (and any wages you are still due) is less than this allowance, then you should claim immediately. This is because the payment from your employer will be totally disregarded - so it won't affect your UC award.
If you are not sure what you are best doing, contact a Benefits Adviser.

My hours are reducing at work and I’ve been advised to claim Universal Credit, but I have been told that, because I am paid monthly, the date I claim can make a big difference – can you explain this?

NOTE: If you are currently getting Tax Credits these can continue if the reduction in your hours is just temporary due to the Coronavirus, so it is best that you check whether claiming UC is the best option for you.

Up until 16th November 2020 it was true that monthly earners needed to consider when to claim Universal Credit because they could end up with two months wages being counted in one Monthly Assessment Period meaning a large drop in entitlement.

However, in June 2020 the Court of Appeal found that taking two monthly wages into account in one Monthly Assessment Period where one of these wages had been paid early due to non-banking days was irrational and unlawful and so the DWP have had to change the Regulations - which took effect on 16th November 2020.  But although the Regulations say the DWP should 'move' the wages so there aren't 2 in one month and one in the next, it appears this is still something they have to do manually, so the claimant has to keep an eye on their payments and if it's not been done, ask the DWP to do so.



My partner has Coronavirus so the whole family has to self-isolate. We’re getting Tax Credits to top up her income, but no Housing Benefit as our earnings are too high. We’re waiting to see if anyone else comes down with Coronavirus but, because our only income is now Statutory Sick Pay and Tax Credits, we are going to struggle to pay the rent.  We don’t want to claim UC and would rather stay on Tax Credits if we can. If we delay claiming UC to see what happens (as this could just be a short term thing) - but then decide to claim UC - will we be able to get the claim backdated? 

Unfortunately, delaying claiming UC for these reasons wouldn’t fall under the rules that would allow a claim for UC to be backdated. 

In the short term, as your partner is receiving Statutory Sick Pay (SSP) she is still treated as being in work for Tax Credit purposes, and so your Tax Credits can continue.

You may also wish to contact a Benefit Adviser to do a benefit check to compare any potential UC award with your current Tax Credit entitlement and then make an informed decision.

Also, let your landlord know about your current situation.


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