07.06.2021 | 9 minutes estimated reading time | Print this article

Universal Credit explained: 2023 guide

The implementation of Universal Credit was a major benefits overhaul from 2012, bringing six different benefit payments together under one title.

Designed to simplify the benefits system and combat fraud, Universal Credit has faced much scrutiny over the last few years due to the length of time that claimants have been waiting to receive their payments.

More than 5.8 million people are thought to be claiming Universal Credit in England, Wales and Scotland. If you’ve recently been affected by the impact of the cost of living crisis, you might also be entitled to make a claim for Universal Credit.

Key highlights

Welfare benefit: Universal Credit is a welfare benefit payment that encompasses housing, childcare, income, and unemployment benefits
Payments: The amount of Universal Credit you’re eligible to receive depends on your personal and financial circumstances
Savings limits: If you have savings between £6,000 and £16,000, your Universal Credit will be reduced

What’s on this page

  • What is Universal Credit?
  • How much is Universal Credit?
  • Can savings affect your Universal Credit?
  • Universal Credit eligibility criteria
  • What counts as income for Universal Credit?
  • How much can you earn before Universal Credit is reduced?
  • How often is Universal Credit paid?
  • How long does it take to receive Universal Credit?

What is Universal Credit?

Universal Credit is a benefit payment for people who meet certain criteria. It encompasses these six previous types of benefit payments:

  • Housing benefit
  • Child tax credit
  • Income support
  • Working tax credit
  • Income-based jobseekers allowance
  • Income-related employment and support allowance

Designed to encourage claimants to work and support themselves as well as reduce the amount of fraud common with the old system, Universal Credit is aimed at people who are of working age and are either actively looking for work or on a low income.

You don’t have to be unemployed in order to claim the credit, and you might still be entitled to the benefit if you currently receive tax credits or financial assistance with your housing costs.

How much is Universal Credit?

Universal Credit and other inflation-linked benefits will rise by 10.1% from April 2023, in line with the Consumer Prices Index (CPI) rate of inflation in September 2022.

Those claiming Universal Credit get one standard allowance per household, with different amounts for single and joint claimants. The amount you can get in the 2023-24 financial year is:

  • £292.11 per month for single claimants under 25
  • £368.74 per month for single claimants aged 25 or over
  • £458.51 per month for joint claimants both under 25
  • £578.82 per month for joint claimants with either aged 25 or over

In addition to the standard allowance, there are also other allowances such as:

  • Child element
  • Childcare costs element
  • Limited capability for work-related activity element (LCWRA)
  • Limited capability for work and work element (not available for new claimants after 3rd April 2017)
  • Carer element
  • Housing costs element

Those currently claiming Universal Credit or other eligible benefits may also be entitled to receive up to three one-off cost of living payments. These additional payments are designed to help low income households with the rising cost of living.

Can savings affect your Universal Credit?

Yes, the amount you have saved can affect your eligibility to receive Universal Credit. If you have savings or capital from things like shares or investments, this will reduce the amount of Universal Credit you can receive.

If you or your partner have £6,000 or less in savings, this won’t affect your claim for Universal Credit. If you have more than £16,000, you won’t be eligible for Universal Credit.

If you have between £6,000 and £16,000, the first £6,000 is disregarded. The rest will be divided up using the below calculation in order to make a deduction.

This calculation is based on every £250 of everything over £6,000, giving you a monthly income of £4.35, which is then multiplied by the amount of months in order to calculate the total deduction. For example, if you had £8,000 in total, the first £6,000 doesn’t count. This leaves you with £2,000.

£2,000 ÷ 250 = 8
8 x £4.35 = £34.80

Therefore, your total deduction based on having £8,000 in savings is £34.80. If you’re still unsure, this benefits calculator can help you work out how your savings may affect your entitlement to Universal Credit. You can read more about the savings and benefits rules here.

Universal Credit eligibility criteria

You may be eligible for Universal Credit if:

  • You’re out of work or on a low income
  • You’re aged 18 or over (there are some exceptions if you’re 16 or 17)
  • You or your partner are under state pension age
  • You and your partner have less than £16,000 in savings
  • You live in the UK

There are some situations in which you can claim Universal Credit if you’re aged between 16 and 17, or if you’re studying. It’s important to note that you must claim this yourself online. If you don’t have access to a computer at home, it’s recommended that you try your local library or Jobcentre.

What counts as income for Universal Credit?

There are two types of income counted for Universal Credit purposes. These are known as earned income and unearned income. Any earned income is money that you earn from working. Unearned income has other sources, and is still taken into account when calculating your maximum reward.

Forms of unearned income include:

  • Pension income
  • New-style Jobseekers Allowance
  • New-style Employment and Support Allowance (ESA)
  • Some benefits that aren’t replaced by Universal Credit
  • Spousal maintenance
  • Income from overseas
  • Income protection insurance payments
  • Payments from a trust fund

How do you claim Universal Credit?

If you’re entitled to claim Universal Credit, you’re expected to do so online on the government’s Universal Credit web page. If you don’t have access to the internet at home, locations such as your local library or Jobcentre may be able to assist you. In order to prepare yourself for the application process, you can find out exactly what you’ll need on the HMRC website.

If you are making a joint claim with your partner, only one of you will need to complete the online form, but that person will need to enter details for both of you.

How much can you earn before Universal Credit is reduced?

Universal Credit was designed to make work pay, which is why you can work any amount of hours when receiving it. It tops up your earnings when you start work or increase your hours. Your payment will reduce gradually as you earn more, so that you won’t lose all of your payments at once.

You can work upwards of 16 hours per week and still receive Universal Credit. If you’re a parent working a few hours a week, you’ll be able to get help with childcare costs so that you can still go to work.

There is a Universal Credit work allowance which is designed to help those who can’t work as much, perhaps due to dependent children or if you’re physically unable to work due to an illness or disability. If you don’t qualify for this allowance, your Universal Credit will be subject to the taper rate.

The taper rate is at 55%, meaning your payment will go down by 55p for every £1 you (or your partner) earn over the threshold.

A recent change to the rules on 30 January 2023 means part-time workers may also have their Universal Credit reduced if they don’t take “active steps” to work more and attend regular meetings with a work coach. Following the changes, the Administrative Earnings Threshold has risen to 15 hours a week (up from 12 hours) at National Living Wage for an individual claimant (and 24 hours a week for couples). Anyone earning below this threshold will now be placed in an intensive work search group.

How often is Universal Credit paid?

In England, Wales and Scotland, Universal Credit is paid monthly in arrears, like a normal wage. In Scotland, you can ask for fortnightly payments instead of a single monthly payment. In Northern Ireland, the default payment period is every fortnight, but you can opt to receive monthly payments.

How long does it take to receive Universal Credit?

From the date you submit your claim to receiving your Universal Credit payment can take up to five weeks, similar to when you start a new job and have to wait for your monthly salary. This period is called your assessment period.

You then have to wait up to seven days for the payment to reach your bank account.

Open a savings account with Raisin UK

If you are worried about the future of your finances amid the cost of living crisis, you might want to consider saving money so you’re prepared for any future financial shock. Whether it’s to take advantage of the recent increases in interest rates or to protect yourself and your family from an unseen financial fallout, opening a savings account will give you more for your money.

And don’t forget, if you’re claiming Universal Credit you might be eligible for Help to Save – a government-backed scheme that pays a tax-free bonus to help boost your savings if you’re on a low income.

Alternatively, if you have discovered that you have too much money in savings in order to be eligible for Universal Credit, you could put that money into a savings account that will generate income based on competitive interest rates. Fixed rate bonds could be a good choice for you if you’re able to lock some of your money away for a fixed amount of time.

To find the best savings account for you and compare interest rates on savings accounts, register for a Raisin UK Account today.

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