How your Universal Credit is worked out
Last updated: 28 Feb 2022
Universal Credit is complicated and it can be difficult to understand your payments. It is still important to check all your payment notices carefully and make sure DWP have all your correct details, including your income for the assessment period they are using. You should also check that the money you are paid matches the amounts DWP say they are due to pay you.
Universal Credit entitlement is calculated over a monthly assessment period. Your assessment period begins on the day you initially make your claim for Universal Credit and lasts for one calendar month. Each subsequent assessment period begins on the same day of month.
Step 1: Calculate your maximum Universal Credit entitlement
First of all, DWP works out your maximum Universal Credit based just on your circumstances in each monthly assessment period.
Universal Credit is made up of different elements that are added together to give your maximum entitlement. The elements are:
- Standard allowance, this is always included but the rate is different for single people, couples and also people under the age of 25.
- Child responsibility element for each child or young person, but usually not for a third or subsequent child born on or after 6 April 2017.
- Disabled child addition – lower rate for each child or young person on Disability Living Allowance or Personal Independence Payment.
- Disabled child addition – higher rate for each child or young person on the highest rate care component of Disability Living Allowance or the enhanced daily living component of Personal Independence Payment.
- Housing costs element, if you have qualifying housing costs.
- Limited capability for work element (LCW), only for people who were assessed as having LCW before 3 April 2017.
- Limited capability for work and work-related activity element (LCWRA), this is included if you are sick or disabled and meet certain conditions.
- Carer element, this is included if you provide at least 35 hours of care a week for a severely disabled person. The person you care for must be getting certain disability benefits. You cannot get the Carer element at the same time as either the LCW or LCWRA element.
- Childcare costs element, this is included if you meet the conditions.
There’s information on our website about the rates of the Universal Credit elements.
Step 2: calculate earned income and unearned income
Deductions are then made from your maximum Universal Credit entitlement for any income or capital you have in each assessment period, the benefit cap is then applied (if appropriate) and the remaining amount is paid to you.
Earned income is deducted at a taper rate of 55%. This means for every £1 you earn, 55p is deducted from your maximum Universal Credit entitlement.
If you are responsible for children or have LCW/LCWRA you will have a work allowance which means some of your earnings are ignored. There are no deductions from your maximum Universal Credit for any earnings you have up to your work allowance amount, only earnings above your work allowance amount are deducted from your maximum Universal Credit (at the taper rate mentioned above)
There’s more information on our website about the taper rate and work allowance.
Unearned income, including income from some benefits (but not including Child Benefit or disability benefits) is deducted in full from your maximum Universal Credit entitlement. This means for every £1 of unearned income you have £1 is deducted from your maximum Universal Credit entitlement.
Step 3: deduct earned income and unearned income from your maximum Universal Credit entitlement
From your maximum Universal Credit entitlement calculated in step 1, deduct earned and unearned income calculated in step 2. This gives your Universal Credit entitlement before the benefit cap.
Step 4: apply the benefit cap (if applicable)
The benefit cap is the maximum amount you can receive each week in certain benefits, including Universal Credit.
Some people are exempt from the benefit cap. On Universal Credit this includes if you are working and earn £617 (net) or more a month, if your Universal Credit award includes a LCWRA or Carer element, or if you (or your partner or child) gets Disability Living Allowance or Personal Independence Payment. There are also other circumstances where the benefit cap doesn’t apply. The amount of the benefit cap depends on your circumstances and whether or not you live in Greater London. You can find information about the benefit cap amounts on gov.uk.
If the benefit cap applies the amount of Universal Credit calculated in step 3 is reduced by the excess. This is the amount your Universal Credit exceed the benefit cap (but not including any amount in the award for childcare costs).
Step 5: transitional protection
Some people who are moved on to Universal Credit by the DWP are entitled to transitional protection to make sure they are not worse off. This only applies to people who the DWP write to and invite to claim Universal Credit, not to people who have had a change of circumstances which means they need to claim Universal Credit. Turn 2 Us has more information about transitional protection.
The easiest way for you to check your Universal Credit entitlement is to use one of the benefits calculators.
What if my income changes?
Universal Credit is designed to be a flexible benefit that can quickly adjust to your circumstances. As the amount of Universal Credit you are entitled to is calculated on your circumstances in each monthly assessment period, if your income goes up or down, you will either get more or less Universal Credit in that assessment period as a result. It is very important to report changes to your income to Universal Credit to avoid being either underpaid or overpaid. If you are an employee and are paid through PAYE, your earnings should automatically be reported to Universal Credit each month by HMRC, but you will need to report any other changes to your income.
What if I have other changes in circumstances?
If your circumstances change so that the maximum Universal Credit you’re entitled to is different, you should report this to Universal Credit as soon as possible. If something happens which might increase your maximum Universal Credit, this can only be backdated to the start of the assessment period in which you report the change. For example, if you have another child or if your rent increases and you don’t report the change within the assessment period it occurs you will miss out on the extra money.
If you don’t report a change in your circumstances you could be underpaid or overpaid and could also have to pay a penalty or be taken to court. You can find out what changes must be reported and how to report them on gov.uk.
This advice applies in England, Wales and Scotland. If you live in another part of the UK, the law may differ. Please call our helpline for more details. If you are in Northern Ireland you can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.
If you have further questions and would like to contact our advice team please use our advice contact form below or call us.
The information on the law contained on this site is provided free of charge and does not, and is not intended to, amount to legal advice to any person on a specific case or matter. If you are not a solicitor, you are advised to obtain specific legal advice about your case or matter and not to rely solely on this information. Law and guidance is changing regularly in this area.
We cannot provide advice on employment rights in Northern Ireland as the law is different. You can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.