How statutory pay or unpaid leave affects your Universal Credit payment

If you are already on Universal Credit, your payments are assessed on your circumstances on a month by month basis. Therefore, if your income is reduced while you are taking any kind of statutory family leave, your Universal Credit should increase for that period.

If you are responsible for a child on Universal Credit you get a work allowance. This is an amount you can earn before your Universal Credit is reduced. For every £1 you earn over your work allowance your Universal Credit is reduced by 55p.

• If you are claiming the housing element of Universal Credit your work allowance is £404 per month (April 2024/25
• If you are not claiming the housing element of Universal Credit your work allowance is £673 a month (April 2024/25)

If you are getting any kind of statutory family pay, including Statutory Maternity Pay, Statutory Paternity Pay, Shared Parental Pay or Statutory Adoption Pay, it is treated as earned income by Universal Credit. If your statutory pay is less than your work allowance it won’t affect the amount of Universal Credit you get. However, your Universal Credit will be reduced by 55p of every £1 of any statutory pay you get above your work allowance.

If you are getting Maternity Allowance, it is treated as unearned income. This means the work allowance does not apply and all of your Maternity Allowance reduces your Universal Credit. For example, if you are paid the flat rate of Maternity Allowance of £184.03 a week, you will lose £184.03 a week in Universal Credit. A recent disappointing High Court decision ruled that treating Maternity Allowance differently to Statutory Maternity Pay (SMP) is justified because SMP is paid by employers through PAYE and Maternity Allowance is a benefit paid by DWP.

If you are taking unpaid family leave such as statutory parental leave or time off for dependants, the reduction in your income should increase your Universal Credit entitlement for the unpaid time you have had off.

Sanctions

If you voluntarily lose pay when you are on Universal Credit, this can result in a sanction.  A sanction means that you would not receive the standard allowance part of your Universal Credit award (or half of it if you claim as a couple). Other elements, like the housing element and child element, are not affected. You wouldn’t normally be sanctioned on maternity, paternity, adoption leave etc and we think it is very unlikely that you would be sanctioned for taking unpaid parental leave.

You should not be sanctioned if you can show that you had good reason for taking unpaid parental leave, e.g. no affordable childcare available during the school holidays, or a sick child needing your presence at home or at their bedside in hospital.

Do I have to work while claiming Universal Credit?

There are no minimum number of hours you need to work in order to claim Universal Credit, however, it is a benefit that has work-related requirements, unless you are unable to work due to long-term illness or disability, caring for a disabled person or responsible for a child under 3. If you are a couple, only one partner can be nominated as the main carer for any children you have. The other partner is usually expected to work full-time, unless they have a long-term illness or disability or are caring for a disabled person. If you have recently had a baby, adopted a child under one, or have become responsible for a child under one, you do not have to take part in any kind of work-related activity until the child reaches one year old. See our page on whether you have to look for work on Universal Credit for further information.

Calculating your entitlement

You can use a benefits calculator to work out how much your Universal Credit should be during periods of statutory family leave. If you will receive your usual pay for part of your assessment period, and statutory pay or no pay for the other part of your assessment period, you will need to work out what your overall pay will be in the assessment period to get an accurate result.

Example 1: Daniel and Sarah’s Universal Credit assessment period is 5th to 4th each month (e.g. 5th May to 4th June). Their first baby is born on 16th May. On 30th May Sarah is paid Statutory Maternity Pay (SMP) from her employer for the whole month. Daniel is also paid by his employer on 30th May. His pay includes Statutory Paternity Pay (SPP) for 2 weeks and the remainder is his usual pay. Their Universal Credit for the period 5th May to 4th June will be based on Sarah’s wage of SMP and Daniel’s wage of part SPP and part his usual wage.

Example 2: Laura is a single parent. Her Universal Credit assessment period is 19th to 18th each month. Her employer pays her monthly on the 30th each month. She had to take unpaid parental leave due to her child being off sick from school between 3rd to 17th December. Her Universal Credit for the assessment period 19th November to 18th December will be based on the wage she receives on 30th November. As this does not include the unpaid time off she won’t see an increase in her Universal Credit for this assessment period. However, her Universal Credit for the assessment period 19th December to 18th January will be based on the wage she receives on 30th December. As this will be a reduced wage due to the 2 weeks of unpaid parental leave she had between 3rd to 17th December, her Universal Credit payment should increase this period.

If your income reduces due to taking paid or unpaid family leave and you are not already on means-tested benefits or Tax Credits, you might be entitled to Universal Credit. If you are on other benefits or Tax Credits you should get further advice as you could end up worse off if you claim Universal Credit.

Universal Credit is the main benefit that can be claimed by families on a low income. It is usually a monthly payment to cover your living costs. How much you get will depend on your circumstances. It takes into account your whole household income and savings. If you you live with a partner you have to claim jointly (even if your partner is working full-time) and their income and savings will be taken into account. You can’t get Universal Credit if you and/or a partner you live with have more than £16,000 in savings or other assets.

Your Universal Credit payment is made up of a ‘basic allowance’ but you may get more money if you have children, pay for childcare, rent your home, have a disability or health condition, or if you are a carer or care for a disabled child. You will not usually get extra Universal Credit for a third or subsequent child born on or after 6 April 2017, unless an you qualify for an exception to the two-child limit.

How earnings, statutory pay and unpaid leave affect Universal Credit

Universal Credit payments are assessed on your circumstances on a month by month basis. Your earnings, any statutory pay you receive, certain other benefits you get including Maternity Allowance (but not including Child Benefit) and any other income and savings you have between £6000-£16,000 are taken into account when working out how much Universal credit you are entitled to. If your income is reduced because you are taking family leave, you might be entitled to Universal Credit, even if you would not usually qualify due to your household income being too high.

If you are responsible for a child on Universal Credit you get a work allowance. This is an amount you can earn before your Universal Credit is reduced. For every £1 you earn over your work allowance your Universal Credit is reduced by 55p.

• If you are claiming the housing element of Universal Credit your work allowance is £404 per month (April 2024/25)
• If you are not claiming the housing element of Universal Credit your work allowance is £673 a month (April 2024/25)

If you are getting any kind of statutory family pay, including Statutory Maternity Pay, Statutory Paternity Pay, Shared Parental Pay or Statutory Adoption Pay, it is treated as earned income by Universal Credit. If your statutory pay is less than your work allowance it won’t affect the amount of Universal Credit you get. However, your Universal Credit will be reduced by 55p of every £1 of any statutory pay you get above your work allowance.

If you are getting Maternity Allowance, it is treated as unearned income. This means the work allowance does not apply and all of your Maternity Allowance reduces your Universal Credit. For example, if you are paid the flat rate of Maternity Allowance of £184.03 a week, you will lose £184.03 a week in Universal Credit. A recent disappointing High Court decision ruled that treating Maternity Allowance differently to Statutory Maternity Pay (SMP) is justified because SMP is paid by employers through PAYE and Maternity Allowance is a benefit paid by DWP.

If you are taking unpaid family leave such as statutory parental leave or time off for dependants, the reduction in your income should increase your Universal Credit entitlement for the unpaid time you have had off.

Sanctions

If you voluntarily lose pay when you are on Universal Credit, this can result in a sanction.  A sanction means that you would not receive the standard allowance part of your Universal Credit award (or half of it if you claim as a couple). Other elements, like the housing element and child element, are not affected. You wouldn’t normally be sanctioned on maternity, paternity, adoption leave etc and we think it is very unlikely that you would be sanctioned for taking unpaid parental leave.

You should not be sanctioned if you can show that you had good reason for taking unpaid parental leave, e.g. no affordable childcare available during the school holidays, or a sick child needing your presence at home or at their bedside in hospital.

Do I have to work while claiming Universal Credit?

There are no minimum number of hours you need to work in order to claim Universal Credit, however, it is a benefit that has work-related requirements, unless you are unable to work due to long-term illness or disability, caring for a disabled person or responsible for a child under 3. If you are a couple, only one partner can be nominated as the main carer for any children you have. The other partner is usually expected to work full-time, unless they have a long-term illness or disability or are caring for a disabled person. If you have recently had a baby, adopted a child under one, or have become responsible for a child under one, you do not have to take part in any kind of work-related activity until the child reaches one year old. See our page on whether you have to look for work on Universal Credit for further information.

Calculating your entitlement

You can use a benefits calculator to work out how much your Universal Credit should be during periods of statutory family leave. Your Universal Credit is based on your income on a monthly assessment period starting on the date you make your claim. If your income is reduced you should make your claim as soon as possible because Universal Credit is not usually backdated, other than in some very limited circumstances, and even then, only by a maximum of one month.

If you claim Universal Credit after a period of reduced pay or unpaid leave and have now returned to work, you may miss out on any Universal Credit you might have been entitled to depending on how often you are paid by your employer and when you make the claim.

Example 1: Paid weekly.

Hayley and Tom are not usually entitled to Universal Credit because they both work and their joint income is too high. Hayley takes 1 week unpaid leave from work between 10th to 16th January to look after their child who is off school sick. She is paid by her employer weekly in arrears. She gets her usual wage on 16th January for the work she did the week 3rd to 9th January. However, on 23rd January her wage is £0 for the unpaid leave she took the week 10th to 16th January. Hayley and Tom make a joint claim for Universal Credit on 24th January – this makes their Universal Credit assessment period 24th January to 23rd February. In that period, Hayley has returned to work and they both get their wages as usual. Unfortunately, they don’t qualify for Universal Credit as their Universal Credit is based on the actual wages they receive in the assessment period and their earnings are too high. If, however, they had claimed Universal Credit on 23rd January (just 1 day earlier), their Universal Credit would be based on their joint earnings during the assessment period 23rd January to 22nd February. As this includes Hayley’s wage of £0 their assessed income is significantly lower, and they are entitled to some Universal Credit for the month.

Example 2: Paid monthly

Example 2: Jason and Ali are not usually entitled to Universal Credit because they both work and their joint income is too high. They are both paid monthly by their employers on the 29th each month. Jason takes 2 weeks unpaid leave from work between 11th to 24th April to look after their child during the school holidays. On 29th April Jason’s pay is reduced due to the unpaid time he took off that month. Jason and Ali make a joint claim for Universal Credit on 30th April – this makes their Universal credit assessment period 30th April to 29th May. In that period Jason has returned to work and they both get their wages as usual on 29th May. Unfortunately, they don’t qualify for Universal Credit as their Universal Credit is based on the actual wages they receive in the assessment period and their earnings are too high. If, however, they had claimed Universal Credit any time between 11th to 29th April, their Universal Credit would be based on the wages they received on 29th April. For example, if they claimed on 18th April, their assessment period would be 18th April to 17th May which includes Jason’s reduced wage, so, their assessed income is significantly lower, and they are entitled to Universal Credit.

Tax Credits have been replaced by Universal Credit so it is no longer possible to make a new Tax Credits claim. If you try to make a new claim for Tax Credits you will be told to claim Universal Credit instead.

If you have an existing Tax Credits claim you can add a new child, but you won’t usually be able to claim for a third or subsequent child born on or after 6 April 2017.

You are treated as working and continue to be entitled to Working Tax Credit during the first 39 weeks of paid maternity or adoption leave, during paid paternity leave and during paid shared parental leave (or if you would be paid if the conditions were met).

Your Tax Credit award for the current year is usually based on your income from the previous tax year, unless you have given HMRC an estimate of income for the current tax year (6th April to following 5 April inclusive). Even then, your Tax Credits won’t change unless this tax year’s expected income is more than £2,500 higher or lower when compared to last tax year. If your income in the current tax year falls due to time on statutory paid family leave then you may be entitled to more Tax Credits, but you should be careful with any estimate of income you give to HMRC to avoid being overpaid. If you later realise the estimate was wrong (e.g. because you go back to work sooner than you expected), make sure you give them a new estimate. Alternatively, you can leave your Tax Credits based on the previous tax year’s income and you will get some money back if you are owed anything during the Tax Credits finalisation process.

You are treated as working during periods of 4 weeks or less on unpaid family leave. If you are on unpaid family leave for more than 4 consecutive weeks, you will stop being treated as if you are working. This includes the last 3 months of unpaid maternity leave if you choose to take it. If you are a single parent, or a couple and your partner is not working or not working the minimum hours required for Working Tax Credit, you may lose your Working Tax Credit entitlement. If you are getting Child Tax Credit this should continue. When you return to work you can add Working Tax Credit back on to your claim, provided that your Child Tax Credit has continued. Depending on how long you expect to be off work on unpaid family leave, you may want to consider whether you would be better off claiming Universal Credit. However, you should not claim Universal Credit without getting further advice, as even if you are better off in the short-term, you could end up worse off in the long-term and you will not be able to go back onto Tax Credits after you’ve claimed Universal Credit.

You cannot make a new claim for Housing Benefit unless you are over State Pension age or live in certain types of supported or temporary accommodation. If you already have an existing claim for Housing Benefit you can continue to get it unless you have a change of circumstances such as moving to a new local authority area, or you stop being entitled to Tax Credits or other means-tested benefits and need to make a new claim for Universal Credit. If you try to make a new claim for Housing Benefit you will be told to claim Universal Credit instead.

If you are not already on Housing Benefit and need help with rent and/or have service charges, you may be able to claim help with housing costs through the housing element of Universal Credit. The amount of help you can get with rent depends on your circumstances and may be different depending on whether you are renting from a council or housing association or from a private landlord.

Housing Benefit is administered by your local authority and is calculated on a weekly basis. If you are already getting Housing Benefit and you take family leave which reduces your income, you may qualify for an increased award during any week where your earnings are lower than usual, if you are not already getting the maximum amount. You should contact your local Housing Benefit department so that your award can be recalculated.

If you pay a mortgage you may be entitled to Support for Mortgage Interest, which is a DWP loan, if your income is reduced during a prolonged period of family leave. Support for Mortgage Interest is only available after 9 months on certain benefits (for Universal Credit, you must also not have any earnings). It is not part of your benefits and has to be applied for separately. If you are of State Pension age and on Pension Credit, different rules apply and you can get the loan payments straight away, if you choose to take the loan.

Council Tax Reduction (sometimes called Council Tax Support) can help reduce your council tax bill if you are on a low income. This benefit is administered by your local authority and they set their own criteria for who qualifies and how much your council tax bill will be reduced by. Council Tax Reduction is not being replaced by Universal Credit, so you can receive it while also claiming Universal Credit, but you don’t necessarily have to be on Universal Credit to qualify. Council Tax Reduction is calculated on a weekly basis. You may qualify for an increased award during any week where your earnings are lower than usual whilst you are on family leave. Contact your local authority benefits department to make a new claim or have an existing claim recalculated if your income has reduced during family leave.

If your income is reduced during a period of family leave, there may be other financial support that you are entitled to such as free school meals, and help with health costs. Please see our page on what you can claim if you are on a low income for further information.

If you have further questions and need more advice about what you can claim during periods of family leave you can ring our helpline or contact us on our advice form.

To work out what benefits you might be entitled to you can use a benefits calculator.

You can also get further advice from Citizens Advice.

If you are a lone parent, you can contact Gingerbread or One Parent Families Scotland.

If you are a carer, Carers UK may be able to help you. If you are an older parent or carer, you could contact Age UK.

If you need advice about benefits for families of disabled children, you can contact Contact helpline 0808 808 3555.