personal finance

Universal Credit: You can earn and save this much before payments are reduced


is a means-tested benefit that is affected by both income and savings. Other benefits that are affected by savings include Income-based Jobseekers Allowance, Income-related Employment and Support Allowance, Housing Benefit, Income Support and Pension Credit. Eligibility for Universal Credit is dependant on a number of factors including if the claimant is on a low income or out of work, if they’re over 18 or under the state pension age and if they’re based in the UK.

However, one of the biggest elements that affects eligibility for Universal Credit is savings amount.

Currently, there are savings limits in place that can decide entirely if the claimant receives benefit payments.

If the claimant, or their partner, have £6,000 or less in savings it will not have an impact on their claim. This number rises to £10,000 for people over state pension age.

If the claimant or their partner has £16,000 or more in savings they will automatically not be entitled to Universal Credit or other benefits.

READ MORE: How will my Universal Credit be affected if I get tax rebate?

The claimant has £7,000 in a savings account and the first £6,000 is ignored.

The remaining £1,000 is counted as giving a monthly income of £17.40. The sum of £1,000 is divided by £250 which gives four as an answer.

£4.35 is then multiplied by this figure: four times £4.35 is £17.40. So, this means that £17.40 will be taken off the monthly Universal Credit payment.

There are separate calculations for the other benefits and state perks including pension and tax credits.

On top of savings, earnings will also affect the amount a claimant receives.

So long as the claimant is employed, their Universal Credit payment will be affected by their income levels.

It will reduce gradually as the claimant earns more. For every £1 the claimant earns their payment will be reduced by 63p.

However, there are certain allowances in place to ensure certain claimants don’t struggle financially or fall behind with bills. There is a work allowance in place which allows certain people to earn a certain amount before payments are reduced.

If the claimant or their partner is responsible for a child, or living with a disability/health condition that affects their ability to work than parts of their payments will be protected and secured. This work allowance can stretch into hundreds of pounds but they’ll also be dependant on if the claimant receives help with housing costs. The government details that eligible claimants who receive help with housing costs will have a working allowance of £287 a month. For claimants who do not receive help with housing costs the work allowance will be £503.

The reductions will kick in after this allowances are taken into consideration. The government provides another example for this: a claimant has a child and receives money for housing costs. They are working and earn £500 during the assessment period. The work allowance will therefore be £287. So, the remaining amount is £213. 63p will be taken from every £1 given in Universal Credit payments. The final calculation is £213 times £0.63 which equals £134.19. The £134.19 will be deducted from their monthly payments so long as their circumstances don’t change.

It is up to the claimant to report any changes that can affect these set up, which includes changes to earnings. If the claimant, inadvertently or not, receives an overpayment the Department for Work and Pensions can take steps to reclaim that money. In most cases the DWP will reduce further payments by between 15 and 25 percent until the money is paid back.



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