Universal Credit while working

Universal Credit can be claimed alongside a job, and many people in lower-paid school, NHS and council roles do. Each month’s payment is your maximum award minus a share of what you earn above any work allowance. As your earnings rise, Universal Credit falls gradually through a taper, so working more always leaves you better off overall. DWP sets the work allowance amounts and the taper percentage and publishes them on gov.uk, where you should check the current figures because they change.

How earnings reduce your payment

Universal Credit starts from a maximum amount for your household. It is made up of a standard allowance plus extra elements for children, housing costs, limited capability for work or caring, and childcare costs if you qualify.

Your earnings reduce that maximum in two steps.

1. Some households get a work allowance: an amount you can earn each month before your Universal Credit starts to fall. You only get one if you are responsible for a child, or you or your partner have limited capability for work. A household that gets help with housing costs through Universal Credit gets a lower work allowance than one that does not.
2. Above the work allowance, or from the first pound if you have no work allowance, your Universal Credit falls by a fixed percentage of every extra pound of earnings. This is the taper.

The taper takes less than the whole of each extra pound, so your combined income from work and Universal Credit still goes up when you earn more.

Which earnings count

Universal Credit counts your take-home earnings, not your gross salary. For each monthly assessment period it takes what you were paid and deducts Income Tax, National Insurance and your pension contributions. Contributions to the NHS Pension Scheme, the Teachers’ Pension Scheme or the LGPS therefore reduce the earnings DWP counts, which slightly increases your Universal Credit compared with the same gross pay and no pension.

If your employer uses PAYE, DWP gets your pay details from HMRC automatically after each payday. You do not normally have to report your wages, but check the earnings figure on your statement each month, as mistakes do happen.

The assessment period and pay dates

Universal Credit works on monthly assessment periods that start on the date you claimed. What matters is the date you are paid, not the period the pay covers. That catches out a lot of public sector staff:

• if your payday moves earlier because of a bank holiday or Christmas, two monthly salaries can land in one assessment period and none in the next, so one payment drops sharply and the next one jumps
• staff paid every four weeks, which is common in some bank and casual roles, will have one assessment period a year with two paydays
• a large arrears payment, such as backdated pay from a delayed pay award, counts in the period it is paid

There are also rules about surplus earnings: if your earnings in one month are high enough to end your award, the excess can be carried forward and reduce later payments if you reclaim. Gov.uk explains how this works.

Term-time and variable hours

School support staff on term-time-only contracts usually have their pay spread across twelve equal monthly instalments, so their Universal Credit stays fairly steady, unlike jobs that pay only for weeks worked. How term-time-only pay is calculated shows how the annual figure is built.

On zero hours, NHS bank or casual hours, your Universal Credit moves every month in the opposite direction to your pay. A month with lots of shifts gives a lower payment, and a quiet month a higher one. Payment arrives after each assessment period ends, so there is always a lag.

Childcare costs

Working parents on Universal Credit can claim back a large share of registered childcare costs through the childcare element, up to a monthly cap. You pay the provider and then report the cost with proof, and it is added to your next payment.

You cannot get Tax-Free Childcare at the same time as Universal Credit. If your earnings are rising, work out which is better before switching, because Tax-Free Childcare adds only £2 for every £8 you pay in. Tax-Free Childcare has the limits.

Savings and other income

Savings and capital above a lower limit reduce your Universal Credit, and savings above an upper limit stop it altogether. Other income such as some benefits, maintenance or pension income can also count. The limits are on gov.uk.

Checking your own position

The rules interact, so the quickest way to see whether you would get anything, and what a change in hours would do, is one of the independent calculators linked from the gov.uk benefits calculators page. Enter your gross pay and pension contributions as they appear on your payslip. Our take-home pay calculator gives the net figure to compare.

For help with a claim or a decision you disagree with, Citizens Advice runs a free Help to Claim service, and you can ask DWP for a mandatory reconsideration within the time limit shown on your decision letter.