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Page Created: 22 April 2021

Employed or Self-Employed

Universal Credit is a monthly payment to help with your living costs. You may be able to get it if you are on a low income, out of work or you cannot work. Find out how these payments are calculated.

How a claimant’s earnings are gathered by the Department for Work & Pensions (DWP) is different under Universal Credit depending on whether you are employed or self-employed.

If you are employed (PAYE), the DWP will check with Her Majesty’s Revenues and Customs (HMRC) to confirm your earnings in real time. This is what is referred to as Real Time Information (RTI).

Claimants who are self-employed, whose business has been running for more than 12-months, and are ‘gainfully employed’, are usually affected by the Minimum Income Floor (MIF).

The MIF assumes your income is at the National Minimum Wage level times the number of hours you are expected to work e.g., 30 x £8.72 = £261.60 a week. This assumed level of income is then considered for how much your monthly Universal Credit payment is to be calculated.

NB: During the Coronavirus outbreak, the MIF has been ‘temporarily suspended’ by the UK government, so that self-employed claimants have their Universal Credit payments calculated based upon their reported actual earnings, and not their MIF.

This means that, if you are self-employed, you will need to remember to be extra careful to report your actual earnings as soon as possible.

Jobs Retention Scheme (JRS) and Self-employed Income Support Scheme (SEISS)

If you have been receiving furlough payments during the Coronavirus period, either as an employee or as self-employed, any payments that you have received will be considered as income for UC purposes.

It is very important that you report your SEISS payments to the DWP if you are self-employed as this could affect your payments later on.

Benefit cap

The benefit cap under Universal Credit caps the maximum amount claimants can receive in one year. To understand this further, remember that your Universal Credit maximum monthly amount is made up of your standard allowance, plus any further additional elements. Once these are added together, if you are affected by the benefit cap, this will limit the maximum amount you can receive in each of your monthly ‘assessment periods.' 

The maximum amounts that Universal Credit can be capped at depends upon whether you live in, or outside, of Greater London.

Inside Greater London:

  • Single person – no children, or children do not live with claimant – £1,284.17 per month.
  • Single person – with children who live with claimant – £1,917.67 per month.
  • Couples – whether children live with them or not – £1,917.67 per month.

Outside Greater London:

  • Single person – no children, or children do not live with claimant – £1,116.67 per month.
  • Single person – with children who live with claimant – £1,666.67 per month.
  • Couples – whether children live with them or not – £1,666.67 per month.

NB: It is important to be aware that, even though Child Benefit (CB) is a completely separate benefit and is not part of your Universal Credit maximum monthly amount, the DWP does take CB into consideration as income, and this can sometimes take claimants over the benefit cap threshold.

Exemptions from the benefit cap under Universal Credit can be made for disabled people, or those with a long-term illness. To be exempt from the benefit cap, claimants will need to be in receipt of one of the following:

  • Disability Living Allowance, Personal Independence Payment, Constant Attendance Allowance, Attendance Allowance, Industrial Injuries Disablement Benefit, Armed Forces Independence Payment; and / or
  • Limited Capability for Work-Related Activity (LCWRA).

Grace period

Claimants who have been working and earning at least £604 per month for the last 12 months could also be excused from the benefit cap for the next nine months.

This is called the ‘grace period’.

For further information on the benefit cap and grace period exemption, please take a look at Entitled to.

To find out more on Universal Credit, eligibility and how to apply, can be found here.

Glossary of terms:

AA – Attendance Allowance.

AFIP – Armed Forces Independence Payment.

CA – Carers Allowance.

CPAG – Child Poverty Action Group.

CTC – Child Tax Credit.

DHP – Discretionary Housing Payment.

DLA – Disability Living Allowance.

ESA – Employment and Support Allowance.

HB – Housing Benefit.

HCPs – Healthcare Professionals.

IAS – Independent Assessment Service (Maximus).

IS – Income Support.

JSA – Jobseeker’s Allowance.

MIF – Minimum Income Floor.

PIP – Personal Independence Payment.

RTI – Real Time Information.

SMI – Support for Mortgage Interest.

WCA – Work Capability Assessment.

WTC – Working Tax Credit.

UC – Universal Credit.

Useful links

Applying for Universal Credit

Benefit Cap and Grace Period

Full-Time Students

Habitual Residents Test

Local Housing Allowance Rates

Mixed Age Couples

Support for Mortgage Interest Rates

Work Capability Assessment:

Work Groups

Universal Credit

16- to 17-year-olds