Universal Credit

Universal Credit is a new benefit for people of working age. It is paid both to people who are out of work and to those in employment.

What is Universal Credit?

Universal Credit is a benefit for people of working age. It is paid both to people who are out of work and to those in employment.

Universal Credit replaces new claims for the following existing means-tested benefits:

Income support.
Income-based Jobseeker’s Allowance.
Income-related Employment and Support Allowance.
Child tax credit.
Working tax credit.
Housing benefit.

These are known as the ‘legacy benefits’.

Other benefits such as Carer’s Allowance, Disability Living Allowance, Child Benefit and Council Tax Reduction continue to exist as separate benefits.

Note: If you claim Universal Credit, any tax credits or means-tested benefits that you already get (except a council tax reduction) will stop. This is the case even if your Universal Credit claim results in a nil award.
Once you claim Universal Credit it is not possible to reverse that decision and reclaim your old means tested benefits. For this reason, you should get advice before claiming Universal Credit to check that a claim will not leave you worse off.

Who can make a claim for Universal Credit and when?

Eligibility

Most people of working age can claim Universal Credit. You can claim regardless of whether you are out of work or in employment. You can claim if you are a job seeker, a carer, or someone who is unfit to work. You must meet certain tests linked to your residence and presence in the UK .

It’s a means-tested benefit, which means the amount that you receive depends on your income and what savings or other capital you have.

You normally need to be at least 18 to claim Universal Credit but special rules allow some 16 and 17 year olds to claim, including many disabled 16 and 17 year olds.

People aged over pension credit age cannot claim Universal Credit and must claim Pension Credit instead. However, different rules apply if you are a couple where one partner is of pension credit age and the other is of working age.

Claiming Universal Credit in education

Most people who are receiving education cannot claim Universal Credit unless they have a dependent child.

However, young disabled people in education can claim if they get DLA or PIP and they are also assessed as unfit to work. This means that most young people in full time education need to go through a medical assessment known as the work capability assessment before they can receive Universal Credit.

For more information on this, see our webpage on Universal Credit for young people receiving education or call our free helpline for detailed advice.

When will I be expected to claim Universal Credit?

New claims

Universal Credit has replaced new claims for the ‘legacy benefits’ (see above) in all parts of the UK.

This means that if you have never claimed means-tested benefits before and now want to do so, you will need to claim Universal Credit.

Only new claims for the means-tested ‘legacy benefits’ are affected by the introduction of Universal Credit. It will still be possible to make new claims for other non-means-tested benefits and for a council tax reduction.

Making a new claim for Disability Living Allowance, Personal Independence Payment or Carer’s Allowance will not lead to any expectation that you claim Universal Credit. Neither will notifying the tax credits office that you have been awarded DLA for your child. This is because this will be treated as a review of an existing tax credit claim and not as a new claim.

If your circumstances change

Similarly, if you are someone who already gets a legacy benefit but have a change in circumstances that means you want to make a new claim for a different legacy benefit, you will need to consider claiming Universal Credit. This is because new claims for legacy benefits are no longer accepted.

You will have the option of claiming Universal Credit instead. It’s up to you whether you claim Universal Credit or not, however if you do claim Universal Credit, any existing legacy benefits you get will have to stop.

Not all changes of circumstances will lead to you having to consider a claim for Universal Credit. It’s only changes of circumstances that would have previously led to you making a new claim for a legacy benefit.

Some people can be left worse off after claiming Universal Credit, so it is always worth getting advice before making a claim.

Common reasons families end up on Universal Credit because of a change in circumstance

If you are an existing tax credit claimant but separate from your partner, you will be told that your couples’ claim for tax credits must end. Unfortunately you will not be able to make a new tax credits claim as a single person, but will have the option of claiming Universal Credit instead. Similar rules apply if you currently claim tax credits as a single person and start to live with a new partner.
If you are a renter who gets housing benefit and you move to a new tenancy in a different council area, your current housing benefit claim will end. You will not be able to make a new claim for housing benefit from your new council but will be told that you can claim Universal Credit towards the rent at your new tenancy instead. The situation is different if you move to a new tenancy in the same council area – that should be treated as a review of an existing housing benefit claim, so housing benefit should still be paid at your new address.
If you are have been getting income-based Job Seeker’s Allowance and start to get DLA care component for your child at the middle or highest rate, you may wish to stop job seeking and to claim income support as a full time carer instead. However you will be told that it’s not possible to make a new claim for income support. You can claim Universal Credit as a carer instead if you want.

Managed migration onto Universal Credit

At the moment only those families who are either new to the benefits system or who have a relevant change (see above) will be asked to claim Universal Credit. However, that situation will eventually change.

The government plans to eventually move all existing legacy benefit claimants onto Universal credit. It calls this process “managed migration”.

Originally the government’s plan was to invite all existing claimants of means-tested benefits and tax credits to claim Universal Credit between 2020 and 2026. However this process has been delayed due to the Covid outbreak.

This process will start with a pilot scheme in the Harrogate jobcentre area in North Yorkshire which is expected to re-commence in April 2022. No updates have been provided for the roll-out nationally.

Warning– Unless you are a disabled adult who is exempt, there is nothing preventing you from opting to move from your existing means-tested benefits onto Universal Credit. However, this may not be a good idea as many families with a disabled child will be worse off under Universal Credit and once you claim Universal Credit you cannot move back onto your old legacy benefits. You can check your likely entitlement to Universal Credit using the benefit calculator on our website.

How to make a claim for Universal Credit

In most cases you need to make a claim for Universal Credit online. In order to do this you will first need to set up an online account via the www.gov.uk website. If you are unable to claim online you may be able to claim by phone instead via the Universal Credit Helpline on 0800 328 5644 (0800 012 1331 in Northern Ireland).

The Department of Work and Pensions (DWP) won’t normally write or phone you about your Universal Credit claim. Instead they will send you messages via your online account, so you will need to check this regularly to see if there is anything they have asked you to do or any information that they have asked you to provide.

The claimant commitment

In order to be paid Universal Credit you will need to sign a ‘claimant commitment’ – this is an agreement between Jobcentre Plus and you, setting out what steps you need to take in order to be paid Universal Credit.

Some groups of claimants are normally expected to look for work in order to be paid (although this requirement was initially suspended during the COVID-19 outbreak it is now being re-introduced).

Once a decision is made on your claim

Jobcentre Plus will send you an email or a text asking you to check your online account. There you’ll find a copy of the decision including a breakdown of how your Universal Credit award has been calculated.

How is Universal Credit paid?

Universal Credit is normally paid monthly in arrears, although if you live in Scotland or Northern Ireland you should have the option of receiving twice monthly payments instead. You receive one payment per household.

There is usually a wait of at least six weeks before you will get your first payment. If this delay causes you hardship you can ask for a ‘short term benefit advance‘. This is a discretionary loan that needs to be repaid to the DWP from your future payments.

If you are renting a property then any help you get with rent will normally be paid to you rather than your landlord. This means that you will have to pass on part of your Universal Credit payments to your landlord to avoid falling into rent arrears. If you live in Scotland or Northern Ireland you can arrange to have rent payments made directly to your landlord instead.

In England and Wales it is only possible to get more frequent payments, split payments or payments direct to your landlord in exceptional circumstances. You can ask the DWP to consider this but your chances of them agreeing will depend on your circumstances.

Guidance suggests some groups will be given higher priority for alternative payments, such as if you have severe debt problems, mental health needs, or are a family with multiple and complex needs.

How much Universal Credit will I get?

Universal Credit is a means-tested benefit. This means that the amount that you get will depend on what other income and savings that you have. It also depends on your individual family circumstances.

You can check your likely entitlement to Universal Credit using the benefit calculator on our website.

The calculation starts with a ‘maximum amount’ of Universal Credit you would get depending on factors such as your family size, caring responsibilities, housing costs and childcare costs. This starts with a standard allowance, paid either as a single person or as part of a couple. This is paid at a reduced rate if you (and your partner if you have one) are under 25.

Extra amounts are then added into your maximum award depending on your family circumstances.

Child disability addition for families with a disabled child

A child disability addition is included for each dependent child in your family who gets Disability Living Allowance (DLA) (or Personal Independence Payment (PIP))

This is paid at one of two rates. The higher rate of £402.41 per month will be awarded for a child who:

Is registered blind.
Gets the highest rate of DLA care component.
Gets the daily living component of PIP at the enhanced rate.

All other children on DLA or PIP will qualify for the lower rate of the addition. This will only be £128.89 per month.

If your child is awarded DLA or PIP, or has an existing award increased to the highest rate DLA care component or the enhanced daily living component of PIP, make sure you tell Universal Credit as quickly as you can.

You can get an idea of how much Universal Credit you will qualify for by using the benefits calculator on our website. However please remember that this figure will replace any legacy benefits you already receive such as tax credits or housing benefit.

Other extra amounts you might receive

Child elements

You get an extra amount known as a child element for each dependent child in your family. This may be paid at a higher rate for your eldest child.

If you are getting Universal Credit and you have a third or subsequent child born on or after 6 April 2017, you will not receive a child element for that child. There are some exceptions to this ‘two child policy’.

Carer element

This is paid if you are eligible for Carer’s Allowance, or if the only thing that stops you from qualifying for Carer’s Allowance is that your earnings are too high. You do not actually have to have claimed Carer’s Allowance – it is sufficient that you meet the normal Carer’s Allowance rules, other than the earnings limit.

If you think you may be eligible for a carer element, inform the DWP via your online Universal Credit account. Where you and your partner care for different people you may be able to get two carer elements.

If the person you look after lives independently then you getting a carer element could affect their benefits. Seek further advice from our helpline.

Limited capability for work elements

If because of health problems you or a partner are not only unfit to work but also unfit to undertake any work-related activity, you can receive an extra element known as the limited capability for work and work-related activity element.

The same person cannot qualify for both a limited capability for work and work-related activity element and a carer element at the same time. If this applies to you, you will only get the higher of the two amounts.

Childcare element

If you are working and pay for registered childcare costs it is possible to receive an extra allowance covering 85 per cent of your childcare costs. To qualify you (and your partner if you have one) must normally work. Any number of hours work will do.

You may also qualify if you work and your partner is unable to provide childcare, either because they are incapable of work, or because they provide regular and substantial care to a disabled person (and they are eligible for Carer’s Allowance).

85% of your childcare costs are met up to a maximum of £646.35 per month for one child and £1,108.04 for two or more children.

Housing element

Includes help towards rent and some service charges.

How does my income and capital affect Universal Credit?

Once your maximum amount of universal credit has been calculated, the DWP then work out how much to deduct due to earnings or the other income you already have.

How does working affect Universal Credit?

There are no rules about how many hours you can work. Instead the amount of Universal Credit you receive is gradually reduced as you earn more.

If you have a dependent child or you are a disabled person then an initial amount of earnings – known as your ‘work allowance’ – is ignored. The amount of your work allowance depends on your circumstances.

Your Universal Credit payments are then reduced by 63p for every £1 you earn above your work allowance (or from nil, if you do not get a work allowance).

Some self-employed people will be assumed to have a minimum amount of earnings, equal to the minimum wage for the number of hours they say they are working. However, this does not apply to anyone who is in the ‘no work-related requirements’ group, including many full time carers. It also doesn’t apply during the first 12 months of starting a new business.

How does other income or capital affect universal credit?

Unearned income is also deducted from your Universal Credit award. £1 will be deducted from your Universal Credit for every £1 of unearned income you have. However, some unearned income is ignored. This includes DLA, PIP and child support maintenance.

You normally cannot be paid any Universal Credit if your capital is above £16,000. If your capital is between £6,000 and £16,000 you will be treated as having £4.35 per month income for every £250, or part of £250 you have above £6,000. Once the DWP have deducted any earnings or other income from your Universal Credit calculation, the amount remaining is what you should be paid in Universal Credit.

Some claimants may find that the amount they get is reduced due to the household benefit cap. However, others are exempt from the benefit cap, including if you have a child on DLA or PIP or you are entitled to the carer element in your Universal Credit award.

Will I be worse off under Universal Credit?

Many families with a disabled child end up worse off under Universal Credit. This is particularly likely if you are an out of work family with a disabled child who does not qualify for the higher disability addition.

This is because the lower rate of the child disability addition is set at £29.55 per week (£128.89 per month). Given that the equivalent additional payment under the existing benefits system is £65.94 per week, this represents a cut of £36.39 per week or just over £1,892 per year. Since the child disability addition is paid for each disabled child, those families with two children on the lower addition could lose twice this amount.

During the Covid outbreak, Universal credit claimants have received an extra £20 per week. However these Covid uplift payments are expected to end in September at which point more families may find that they are worse off on Universal Credit.

You can find out more about this issue and the other reasons why some families with disabled children could be worse off under Universal Credit in our briefing – Universal Credit and Disabled Children

Won’t families be transitionally protected to make sure they won’t lose out under Universal Credit?

The government has said that it will transitionally protect some existing claimants. However, this will only apply to existing claimants with no changes in their circumstances who are moved onto Universal Credit by the government as part of ‘managed migration’. These families will be able to receive top-up payments to ensure they are no worse off under Universal Credit.

However, if you are someone who has to claim Universal Credit because you have had a change of circumstances and tried to claim one of the legacy benefits, you will not get any transitional protection.

The are only 2 exceptions to this. Firstly some disabled adults who have already been moved onto Universal Credit and who previously qualified for a payment known as the severe disability premium as part of a legacy benefit should get transitional payments to compensate for the loss of the severe disability premium.

Secondly if you are a family who had to move onto Universal Credit as a result of a DWP mistake (e.g. your child’s DLA was initially stopped before being put back in place on appeal and this meant your income support claim as a carer was terminated) and you now receive a lower disabled child addition than was paid under legacy benefits like tax credits, you should either get a transitional payment or be allowed to go back onto legacy benefits. This is as a result of the Court of Appeal decision in R (TD & Ors) v Secretary of State for Work and Pensions. Phone our free helpline for more details if you think this applies to you.

Even if you are someone who receives transitional protection you are still likely to be worse off over time as transitional protection payments will not be uprated with inflation. Some changes in circumstances will also reduce the amount of transitional protection you will receive.

Transitional protection will also be limited for those who are manage migrated onto Universal Credit but who have capital of more than £16,000. The capital they have above £16,000 will only be ignored for 12 months. If they still have more than £16,000 in capital after 12 months, their Universal Credit award will come to an end.

How changes in circumstances affect Universal Credit

Your Universal Credit award is based on your circumstances and income over an assessment period of one month.

The date of your assessment period depends on when you first claimed Universal Credit. For example, if your date of claim was 9 March, your assessment period runs from the ninth of each month until the eighth of the following month.

You are expected to notify the DWP of any changes in your circumstances that might affect your award, and there is a penalty of £50 if you fail to do so without good cause.

If you have a change that means you qualify for lower Universal Credit payments, that change is always treated as if it happened at the start of your monthly assessment period. If you have a change that means your Universal Credit award increases, then that too can be treated as if it happened at the start of the month – but only if you tell the DWP about it before the end of your assessment period.

Employed workers don’t normally need to tell the DWP about changes in earnings. This is because your monthly earnings should automatically be notified to the DWP via HMRCs “real-time information” system. However, if you are self-employed you will need to report your profits every month.

See our page on changes in circumstances for more information about situations that might affect your benefit claims.