Universal Credit is a payment to help with your living costs. It’s paid monthly – or twice a month for some people in Scotland.
You may be able to get it if you’re on a low income, out of work or you cannot work.
Universal Credit is replacing the following benefits and tax credits:
• Child Tax Credit
• Housing Benefit
• Income Support
• income-based Jobseeker’s Allowance (JSA)
• income-related Employment and Support Allowance (ESA)
• Working Tax Credit
If you’re getting any of these benefits or tax credits, you do not need to do anything unless either:
• your circumstances change
• you get a letter called a ‘Migration Notice’ telling you that you must claim Universal Credit
You’ll stop getting these benefits and tax credits when you or your partner claims Universal Credit. If you or your partner gets Pension Credit, this will also stop if one of you claims Universal Credit.
This will not affect any other benefits you’re getting, such as Personal Independence Payment (PIP) or Carer’s Allowance.
You may be able to get Universal Credit if you’re on a low income or need help with your living costs. You could be:
• out of work
• working (including self-employed or part time)
• unable to work, for example because of a health condition
To claim you must:
• live in the UK
• be aged 18 or over (there are some exceptions if you’re 16 to 17)
• be under State Pension age
• have £16,000 or less in money, savings and investments
Universal Credit includes amounts for
• Basic expenses
• Housing costs
• Children
• Disabilities
Universal Credit will be calculated based on your income. This will include your income from student loans for maintenance and student grants.
Student income and Universal Credit
The following steps can help you to calculate:
Step 1 – Work out your total student income and take out disregarded grants.
Step 2 – Your student loan for maintenance should be averaged out across the academic year. Work out how many months this will cover during the year of study.
Step 3 – Divide the amount of Step 1 by the amount from Step 2
Step 4 – Take out £110 from the amount in Step 3 and you can find out how much will be deducted for your student income when calculating your Universal Credit.
Students don’t get any work allowance before student income is deducted from Universal Credit.
Universal Credit (UC): Earnings
Earnings affect the amount of Universal Credit you receive. If you are paid through Pay As You Earn (PAYE), Universal Credit is automatically updated on the amount of earnings you have received.
Earning more money won’t mean any of the Universal Credit elements you are entitled to stop being paid.
You can use our Benefits Calculator to see exactly how much will be deducted from your Universal Credit because of your earnings.
Universal Credit is calculated based on your net earnings. This means your earnings after deductions for tax, national insurance and pension deductions.
If you have deductions from your wages for other things (for example student loan deductions, paying back an advance of wages or child support), they won’t be taken into account when working out your earnings for Universal Credit.
If your employer pays expenses, they shouldn’t be treated as earnings. If they are being treated as earnings by Universal Credit, this probably means your employer is reporting them incorrectly to HM Revenue and Customs (HMRC).
Work Allowance
Some people can earn a certain amount of money before their earnings begin to affect their Universal Credit.
There are different Work Allowance amounts for people who get help with their housing costs through Universal Credit and people who don’t. People who get Housing Benefit because they live in temporary or supported accommodation are treated as if they get help with their housing costs through Universal Credit.
Do I qualify for a Work Allowance?
You can get a Work Allowance if you (and/or your partner who you live with) either:
• have responsibility for a child and/or
• have a limited capability for work due to illness or disability.
How much is the Work Allowance?
• If you get help with housing costs through Universal Credit, your Work Allowance is £379 per month.
• If you do not get help with housing costs through Universal Credit, your Work Allowance is £631 per month.
If you have earnings but you (and your partner) are not responsible for a child and do not have limited capability for work, you will not be eligible for a Work Allowance.
Universal Credit (UC) income: Self-employed earnings
If you are self employed, the Work Allowance and taper rate are the same as for employed people. However, a ‘minimum income floor’ can be used if you are self employed.
Minimum income floor
When you are self employed and you claim Universal Credit, you are treated as if you are earning a certain amount. This amount is called the ‘minimum income floor’.
If the minimum income floor applies to you and you earn below this level in any month, you are treated as earning the minimum income floor.
If you are earning more than the minimum income floor, your actual earnings are taken into account instead.
The minimum income floor is the equivalent of someone working full time (35 hours per week unless you have other responsibilities) on the National Minimum Wage for your age group.
The Minimum Income Floor doesn’t apply to you if you aren’t someone who would be expected to look for work. You can read more about that in our Self Employment and Benefits guide.
Start up period
If you start a business while you are claiming Universal Credit, the minimum income floor will not apply to you for the first 12 months. This ‘start up period’ gives you a chance to grow your business. In the start up period, your Universal Credit payment is calculated based on your actual earnings even if they are lower than your minimum income floor.
You get a 12 month start up period for the first 12 months of your Universal Credit claim if you started your business less than one year before you started your claim. You can only have one start up period for each business and you can only have one start up period in every five years.
Started claiming Universal Credit within the past year
The Minimum Income Floor won’t apply for you for the first year of your Universal Credit claim.
Proof of self-employed earnings
If you are self employed, you will have to supply monthly ‘cash-in and cash-out’ figures to the Department for Work and Pensions (DWP).
If you fail to supply these figures between seven days before and 14 days after each assessment period, your Universal Credit payment will be suspended.
If you need more information about universal credit and self employed please contact 02035531059