Universal Credit update for people in work

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Posted on15 Nov 2021

If you are working and claiming Universal Credit to top-up your household income, you may see a small increase in your income from December. This is because the Chancellor has announced that the ‘taper rate’ applied to claims will decrease.

Currently the taper rate takes into account 63p in every £1 over and above any applicable Work Allowance (see below). This means that for every extra £1 you earn, you lose 63p in Universal Credit. From December, the taper rate will reduce to 55p in every £1. This means that you will lose 55p for every extra £1 you earn.

As an example, a person with eligible housing costs of £500 per month and net earnings of £1000 per month, would receive £194.84 in Universal Credit. This is assuming they are single, aged 25 or over and have no dependent children, health issues or other income.

Standard Allowance £324.84
Housing costs £500
Total £824.84
Minus taper rate £630 (63p for every pound earned)
Universal credit payable £194.84

The same person would receive the new amount of £274.84 in Universal Credit, from December.

Standard Allowance £324.48
Housing costs £500
Total £824.84
Minus taper rate £550 (55p for every pound earned)
Universal credit payable £274.84

If you are not currently working, your Universal Credit will not be affected by this change.

Work allowance

In addition to the taper rate change, the Universal Credit work allowance is also due to increase by £500 per year in December 2021. The work allowance means that some households, for example those with dependent children, can earn a certain amount before the taper rate becomes applicable. This is currently £293 per month if a household has eligible housing costs or £515 if not. From December this will increase to £334.67 for households with eligible housing costs and £556.67 if not.

Calculating Universal Credit can be a complicated process. The above calculations are meant to be simple examples to give an estimate of how much payments could increase from December 2021. For more information or to discuss your own situation, contact our Money and Benefits Advice team on 0800 5870211 or at [email protected]. Our advisers can provide further details and support, including assistance with individual benefit calculations.