Page created: 22 April 2021

Universal Credit (UC)

What is Universal Credit?

Universal Credit (UC) is an income-related UK welfare benefit, first introduced in 2013. UC was designed to help claimants on low incomes with living costs, such as rent, utilities, childcare costs and supplementing a claimant’s earnings.

The Department of Work and Pensions' (DWP) mission statement for Universal Credit states that UC was created to give incentives for claimants to get back into work, to reduce in-work poverty and to make it easier for claimants to understand how to apply for income-related welfare benefits.

Since 2013, Universal Credit has begun to gradually replace these six previous income-related welfare benefits for working age claimants:

  • income-based Jobseeker’s Allowance (JSA)(IR).
  • income-related Employment and Support Allowance (ESA)(IR).
  • Housing Benefit (HB).
  • Income Support (IS).
  • Child Tax Credit (CTC) and Working Tax Credit (WTC).

These benefits are sometimes referred to as, Legacy benefits.

Unlike the Legacy benefits mentioned above, which are paid weekly or fortnightly, Universal Credit is paid to claimants on a monthly basis. This is referred to as an ‘assessment period’.

NB: Universal Credit is paid twice a month if you live in Scotland.

Earnings

It is important for every claimant to understand how Universal Credit works in regard to earnings. Because UC is focused around getting claimants back into work and helping those on low incomes, how much UC you can receive is also based upon how much you (or your partner) earn.

This means that the maximum amount of Universal Credit you can receive each month will be reduced by 63p for every pound that you (or your partner) earn within a month.   

The less you earn the more Universal Credit you can receive. As you begin to work and earn, your UC reduces until you no longer receive any benefit.

So, who is eligible to claim Universal Credit?

Initial eligibility

Generally, Universal Credit is open to all working age claimants aged between 18 and State Pension Age, and who are presently living within the UK. Claimants will need to be on a low income or out of work to be eligible to receive UC.

If you do not fit these basic eligibility requirements for Universal Credit, there are some exceptions that may apply to you.

16- to 17-year-olds are generally not eligible for Universal Credit, although there are some exceptions to this rule. For further details on when 16- to 17-year-olds may be eligible for UC, please take a look at this helpful web page from Entitled to.

For couples where one of you has already reached State Pension Age but the other has not, due to recent changes in 2019, this group which are commonly referred to as ‘mixed age’ couples will now need to apply for Universal Credit instead of moving on to Pension Credit.

For further information on mixed age couples and applying for UC, please take a look at this helpful web page from the Child Poverty Action Group (CPAG).

All claimants will need to be resident in the UK to be eligible for Universal Credit – meaning they will need to pass the ‘Habitual Residents’ test, and in some cases, the ‘Past Presence’ test. Further information regarding these tests can be found at Turn2us.

Generally, if you are a full-time student, you will not be able to make a new claim for Universal Credit. This is because, in order to be eligible for UC and be a full-time student at the same time, you will need to have had a Work Capability Assessment under UC, be in receipt of PIP, DLA, AA or AFIP, or be responsible for caring for a child.

Unfortunately, new claimants will need to make a new Universal Credit claim in order to even apply for a WCA.

For further information on Universal Credit and full-time students, can be found here.

Capital limits

As Universal Credit is an income-related welfare benefit, a claimant (and their partner's) savings, earnings and capital will always be considered for eligibility.

This means that, if you have savings or capital over £16,000, unfortunately, you will not be eligible for UC at all.

If you have savings or capital between £6,000 and £16,000, a ‘tariff income’ is applied. This means that for every £250 you have in savings or capital in excess of £6,000, up to the amount of £16,000, £4.35 per week will be deducted from your UC maximum amount per month.

Applying for Universal Credit (UC)

Apply for Universal Credit - a monthly payment to help with your living costs if you're on a low income or out of work. Further information can be found here.