The answer, as with many benefit questions, is … it depends!
How much can you earn and still get UC?
“How much can you earn and still get UC?” is a question that regularly comes up on training courses and in discussions.
The answer, as with many benefit questions, is … it depends!
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.
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’ amount 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. Click here for more info on the various Elements.
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 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.
NOTE: The maximum amount of help available for qualifying childcare increased in June 2023 - meaning more working people are now entitled to UC - click here for more information.
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 received during the claimant’s MAP. These will reduce the claimant’s ‘Maximum UC’ by 55p 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 have been found to have, or are treated as having, a limited capability for work or work related activity.
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 or lives in temporary accommodation (£379); the higher level is for claimants whose ‘Maximum UC’ doesn’t include a Housing Costs Element (£631): this takes into account the fact that they may have a mortgage to pay.
Click here for more on the work allowance.
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 £2680.00 net a month or around £42,000 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 he earned £400 net a month!
Examples:
The following table assumes that the claimant has no unearned income and that their Maximum UC includes a Housing Costs Element
NOTE: Where the claimant’s rent is different, then this will affect the answers. And if they are paying for 'qualifying' childcare the amount they earn and still be entitled to UC can be higher.
Please note figures are approximate.
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Household
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Max net monthly earnings before entitlement to UC is nil
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Estimated max gross annual salary before entitlement to UC is nil*
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Single, under 25 year old, £300 eligible housing costs, no extra elements
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£1,072 net
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£13,000 gross
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Single, over 25 year old, £300 eligible housing costs, no extra elements
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£1,214 net
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£15,500 gross
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Single, over 25, Limited Capability for Work (pre April 17) and £300 housing costs
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£1,860 net
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£26,900 gross
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Couple, over 25, no children, no extra elements, £500 eligible housing costs
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£1,959 net
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£28,650 gross
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Single parent, over 25, with one child born before April 2017, no other elements and £500 eligible housing costs.
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£2,528 net
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£38,700 gross
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Couple aged over 25, with 2 children born before April 2017, no other elements and £500 eligible housing costs.
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£3,403 net
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£54,800 gross
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Couple aged over 25, with 2 children born before April 2017, no other elements and £1,000 eligible housing costs.
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£4311 net
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£73.600 gross
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Couple aged over 25, with 3 children born before April 2017, one lower disabled child premium, one carer addition, and £600 eligible housing costs.
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£4,679 net
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£81,200 gross
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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, £700 eligible housing costs
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£6,625.13 net
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£130,600 gross
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* Assumes one earner per family with basic tax code ie no deductions other than tax and NI.
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Can I work this out myself?
You can use the following formulas to determine the maximum someone can earn net and still be entitled to UC.
No unearned income, entitled to a work allowance:
Maximum UC divided by 55, multiplied by 100, plus any work allowance.
No unearned income, not entitled to a work allowance:
Maximum UC divided by 55, multiplied by 100.
Unearned income, entitled to a work allowance:
(Maximum UC – unearned income monthly figure) divided by 55, multiplied by 100, plus any work allowance.
Unearned income, not entitled to a work allowance:
(Maximum UC – unearned income monthly figure) divided by 55, multiplied by 100.
Thinking about claiming UC?
Remember: if someone makes a claim for Universal Credit any Tax Credits that they currently receive will stop, and certain deductions can be taken out of a UC award that cannot be taken out of a Tax Credit award.
Someone should always double check that they will be better off before claiming UC - as there is no going back!
Received a Migration Notice?
Where someone has received a Migration Notice and has a nil UC entitlement due to earnings (or savings) then they are likely to be entitled to a Transitional Element so should make a claim for UC withinthe deadlines given.