Ultimate guide to Universal Credit in the UK

What is Universal Credit?

Universal Credit was introduced in 2013. It aims to simplify the way in which UK state benefits are calculated and received.

Universal Credit replaces six benefits:

1. Housing Benefit
2. Child Tax Credit
3. Income Support
4. Working Tax Credit
5. Income-based Jobseeker’s Allowance
6. Income-related Employment and Support Allowance

People who apply for government support will now get Universal Credit instead of these six benefits. People already on these benefits are gradually being moved over to Universal Credit. This process is known as migration.

Universal Credit is a 'working age' benefit. This means it is payable from the age of 18 to State Pension age.

Eligibility for Universal Credit

You must meet certain criteria to be eligible for Universal Credit.

Universal Credit eligibility rules mean you need to:

1. Live in the UK
2. Be age 18 or over (there are some exceptions if you’re 16 to 17)
3. Be under State Pension age
4. Have £16,000 or less in savings and investments

Universal Credit eligibility can extend to 16 and 17-year-olds in limited circumstances, such as:

• Being a carer
• Having health problems
• Being estranged from your parents
• Pregnancy, childbirth and looking after children

You may be eligible for Universal Credit if you’re:

• Out of work
• Working but on a low income (including self-employed or part-time)
• Unable to work (for example, because of a health condition or caring commitments)
• A student who is disabled or has health conditions or looks after children. You must have already been assessed as having limited capability for work by a Work Capability Assessment

Use a benefits calculator to see whether you might be eligible to claim.

How does Universal Credit work?

Universal Credit is administered by the Department for Work and Pensions (DWP). The amount of Universal Credit you can get will depend on your circumstances and your income. You can get Universal Credit if you are in work but have low earnings.

If you live with your partner as a couple, you will need to make a joint claim for Universal Credit. This applies even if you are not married or if one partner is not eligible. How much Universal Credit you can get will depend on your partner’s income and savings, not just your own.

Income and savings thresholds

There’s no set level of income where you start or stop being eligible for Universal Credit. It depends on your personal circumstances. You must usually have less than £16,000 in savings or other investments to get Universal Credit. This doesn’t include the home you live in or your pension pot.

If you live with a partner, their income and savings will be taken into account.

How much is Universal Credit?

How much Universal Credit you get will depend on:

• Your (and your partner's) income
• Your (and your partner's) savings
• Your age
• Family circumstances (couple or single, any children)
• If you or your partner are incapable of work
• If you or your partner are a carer
• If you have housing costs such as rent

There is a monthly standard amount plus additional top-up allowances.

How to claim Universal Credit

You can apply for Universal Credit online. To complete your application, you’ll need an email address and to set up a username and password. You’ll then be sent a one-time passcode to your mobile phone. Applying online will take about 30 minutes to an hour, depending on your circumstances.

The date you submit your Universal Credit application is called your ‘assessment date’. It will be the day in the month your money is paid. For example, if you submit your application on 11th July, you will be paid on the 11^th of every month.

Step-by-step application process

1. Create a Universal Credit account and make a note of your Universal Credit login.
2. If you live with a partner, they will need to create a Universal Credit account too. You'll be sent a code to link the accounts together.
3. Submit your claim within 28 days of creating your account.
4. Attend an interview with Jobcentre Plus. You'll be told how to arrange this after you submit your claim. It should be within 10 working days.
5. If you have a disability or health condition, you may need to complete a ‘work capability assessment’.
6. If necessary, apply for an advance of your first Universal Credit payment.
7. Your first payment should arrive five weeks after you submit your claim.
8. You must update your account if your circumstances change.

Required documents and information

To apply online you’ll need the following:

• Your bank or building society account details
• An email address and access to a mobile phone
• Proof of identity (driving licence or passport)
• Your National Insurance number
• How much rent you pay
• Your earnings
• Details of any benefits you currently get
• Information about any disability or health condition that affects your work
• How much you pay for childcare
• Details of your savings, investments, or any property that you rent out

Benefits included in Universal Credit

Universal Credit replaces six legacy benefits. These are:

• Child Tax Credit
• Housing Benefit
• Income Support
• Income-based Jobseeker’s Allowance (JSA)
• Income-related Employment and Support Allowance (ESA)
• Working Tax Credit

How much Universal Credit you get will depend on:

• Your standard allowance
• Any extra amounts that apply to you

Standard allowance rates

You’ll get a standard allowance for your household. The standard allowance depends on your circumstances and is shown on the following table:

Additional Universal Credit elements for specific needs

You may get extra money on top of your standard allowance.

Extra money could relate to:

• Children
• Childcare
• A disability or health condition
• Housing

Additional elements for children

You could get an extra amount for your children, if they live with you. This is normally only for your first two children.

This table shows how much you’ll get:

You might be able to claim for third and additional children if:

• Your children were born before 6 April 2017
• You were already claiming for three or more children before 6 April 2017
• Other exceptions apply such as multiple births, adoptions and children born as a result of non-consensual conception

Additional elements for childcare

If you’re working, you can claim up to 85% of your childcare costs if the childcare is with a registered provider. The most you can get in childcare support each month is:

• £1,014.63 for one child
• £1,739.37 for two or more children

Additional elements for a health condition

If you have ‘limited capability for work and work-related activity’ you can get extra Universal Credit. The maximum amount is £416.19 a month. If you have limited capability for work but started your health-related Universal Credit or ESA claim before 3 April 2017 you will get £156.11.

You could also get an extra payment if you care for someone who gets a health or disability-related benefit. Assuming you provide care for at least 35 hours a week, you could get £198.31 a month more. This is on top of any extra amount you get if you have a disabled child.

Additional elements for housing

The housing payment element of Universal Credit will pay some, or all, of your rent. The amount you’ll get will depend on how many people you live with and the Local Housing Allowance (LHA) rate for your area.

How are Universal Credit payments calculated and paid?

Universal Credit is calculated based on your circumstances each month. Changes in your circumstances can affect how much you’re paid. You should report a change of circumstances to get the correct payment.

If you work, your Universal Credit payment will reduce as your wages go up. It will increase if you stop working or your income goes down.

For every £1 you or your partner earns from working, your payment goes down by 55p. This amount will be automatically deducted from your Universal Credit payment.

You can earn a certain amount before your Universal Credit is reduced if you or your partner are either:

• Responsible for a child or young person
• Living with a disability or health condition that affects your ability to work

This amount is called a ‘work allowance’. If you get help with housing costs, your payment will start to reduce when your monthly wages reach £404. If you don’t get help with housing costs, your payment will start to reduce when your monthly wages reach £673.

Most people on Universal Credit will have their payment limited by the benefits cap. This is a limit on the total amount of benefits that most working-age households can receive.

Understanding your assessment period

Your Universal Credit payment is calculated based on your earnings in an ‘assessment period’, which is one calendar month. Your first assessment period starts the day you make a claim. If you are an employee and are paid through Pay As You Earn (PAYE), you won’t need to report your pay as it will be done automatically.

You’ll usually get your Universal Credit payment seven days after each monthly assessment period ends.

How are Universal Credit payments calculated if you’re self-employed?

If you’re self-employed, at the end of each monthly assessment period, you’ll need to report:

• How much you earned from self-employment
• Any money you paid into a pension
• Payments into and out of your business

If you are self-employed and your earnings are low, your Universal Credit payment might be worked out on higher earnings than you have. This is called the ‘minimum income floor’. The minimum income floor is set at the level of the National Minimum Wage at the number of hours you would be expected to work.

If your earnings are below the minimum income floor, the minimum income floor figure will be used to work out your Universal Credit amount instead of your earnings figure. If you earn above the minimum income floor, your actual earnings will be used to work out your payment.

Payment frequency and methods

Universal Credit is paid once a month. It will be paid into your bank, building society or credit union account.

Changes in circumstances and Universal Credit

You need to report changes in your circumstances to DWP as soon as they happen. This is so you keep getting the right amount of Universal Credit each month.

Changes might include:

• Finding or finishing a job
• Having a child
• Moving in with your partner
• Separating from a partner
• Moving house
• Your rent going up or down
• Changes to your health condition
• Changes to your earnings if you’re self-employed

Reporting changes in circumstances

You should report changes to your circumstances as soon as possible. You can do this by signing in to your Universal Credit account. If you are overpaid, you’ll need to pay the money back.

How changes affect payments

Changes to your circumstances can affect how much Universal Credit you get. They can also impact what work-related activities you need to do in exchange for your Universal Credit payment.

Managing Your Universal Credit

Tips for effective management

The Universal Credit system can be challenging. It’s important to stay on top of things.

Here are some tips for effective management:

1. If you’re struggling financially while you wait for your first payment, you can apply for an ‘advance payment’ of your Universal Credit. You’ll need to pay this back later.
2. If you are already receiving Universal Credit, you may also be able to get a Budgeting Advance to help pay for emergency household costs.
3. Always update your Universal Credit account as soon as possible with any changes to your circumstances. This will ensure your payments are accurate.
4. Make a budget. Your weekly or monthly budget should take into account your Universal Credit payment schedule, as well as when you are paid for any work you do.
5. Get help if necessary. Citizens Advice and MoneyHelper can all offer help with personal budgeting support.

Universal Credit and work

When you claim Universal Credit you will need to accept your ‘claimant commitment’. This will include your ‘work related requirements’. These conditions are based on your personal circumstances. They state what you will do to look for work or to increase your earnings.

You need to stick to your claimant commitment to keep getting Universal Credit.

Universal Credit FAQs

What is the Administrative Earnings Threshold?

If you earn less than a certain amount each month – called the Administrative Earnings Threshold (AET) – you will need to show your work coach you’re looking for more work. This might be a better paid job or more hours at your existing job.

The AET is currently:

• £892 a month for single claimants
• £1,437 a month combined earnings for joint claimants

What is a Universal Credit sanction?

If you don’t stick to the terms of your claim commitment, you might be sanctioned. This means that some of the money from your Universal Credit will be taken away for a set period.

What is a Migration Notice?

The Department for Work and Pensions (DWP) is moving everyone claiming legacy benefits to Universal Credit. When it’s your turn, you will be sent a Migration Notice in the post.

The letter will ask you to claim Universal Credit within three months of the date of the letter. You won’t be moved to Universal Credit automatically – so make sure you claim. You shouldn’t be worse off on Universal Credit than you were on your previous benefits.

What is a managed payment to landlord?

If you have missed rent payments, your landlord may ask for your rent to be paid directly to them. This is called ‘managed payment to landlord’ or ‘direct rent payment’.

How can I get help with my Universal Credit claim?

The government Universal Credit helpline is 0800 328 5644.

Alternatively, you can call the Help to Claim service provided by Citizens Advice on the following numbers:

• England 0800 144 8 444
• Scotland 0800 023 2581
• Wales 08000 241 220

Summary: Navigating Universal Credit

The aim of Universal Credit is to simplify the way benefits are calculated and paid. Under Universal Credit, you’ll get one benefit payment each month. If you make a joint claim with your partner, this payment is for both of you.

How much Universal Credit you get depends on your circumstances. If your circumstances change, you need to report this to the DWP via your Universal Account online.