Universal Credit Explained

Update 20 March 2020: Due to the unprecedented events of the Coronavirus, Universal Credit has been increased by £1,000 per year.

Universal Credit is a financial support system introduced by the government in October 2013.

It is usually paid monthly to cover your living costs, but the amount you’ll receive will depend on your personal circumstances.

It was designed to simplify the benefits system by merging the six main benefits into one.

What is Universal Credit

Universal Credit is a form of financial support available for people with low income or who some temporary help, including the self-employed.

It is a single system that replaces the following benefits:

  1. Child Tax Credit
  2. Housing Benefit
  3. Income Support
  4. Income-based Jobseeker’s Allowance (JSA)
  5. Income-related Employment and Support Allowance (ESA)
  6. Working Tax Credit

Who Can Claim Universal Credit

You may be eligible to claim Universal Credit if you’re:

If you like with your partner then their income and savings will be taken into account when calculating your Universal Credit, even if they are not eligible.

How Much is Universal Credit?

Universal Credit is made up of a standard monthly allowance plus additional amounts for example if you:

  • have children;
  • pay for childcare;
  • have a health condition or disability that prevents you from working;
  • need a contribution towards your housing costs.

Universal Credit Standard Monthly Allowance

The standard monthly allowance you are entitled to can vary according to your personal circumstances.

It may be reduced depending on the benefits cap, your income and household savings.

The standard monthly allowance for 2019/2020 before any adjustments are:

Your circumstancesMonthly Allowance
Single and under 25£342.72
Single and 25 or over £409.89
In a couple and you’re both under 25£488.59 (for you both)
In a couple and either of you are 25 or over£594.04 (for you both)

Update 20 March 2020: Due to the unprecedented events of the Coronavirus, Universal Credit has been increased by £1,000 per year.

Extra Amounts You May Be Entitled To

If You Have Children

You generally only get an extra amount for up to 2 children. If you have 3 children or more you will only receive you’ll only get an extra amount for 2 children.

If one or more of your children are disabled you’ll receive extra amounts regardless of how many children you have.

However, you can claim an extra amount for a third child or more if any of the following are true:

  • your children were born before 6 April 2017
  • you were already claiming for 3 or more children before 6 April 2017
  • other exceptions apply
CriteriaExtra Amount
For your first child £277.08 (born before 6 April 2017)
£231.67 (born on or after 6 April 2017)
For your second child and any other eligible children £231.67 per child
If you have a disabled or severely disabled child £126.11 or £383.86
If you need help with childcare costs up to 85% of your costs (up to £646.35 for one child and £1,108.04 for 2 or more children)

If you have a disability or health condition

CriteriaExtra Amount
If you have limited capability for work and work-related activity£328.32
If you have limited capability for work and you started your health-related Universal Credit or Employment and Support Allowance (ESA) claim before 3 April 2017 £126.11

If you care for a severely disabled person

Your circumstancesExtra Amount
If you provide care for at least 35 hours a week for a severely disabled person who receives a disability-related benefit £156.45

How Savings Affect Universal Credit

Savings, either held by you or your partner, will affect how much you can claim as they are considered a source of income:

  • If you have less than £6,000 you claim will not be affected;
  • If you have between £6,000 and £16,000 in savings you claim will be tapered;
  • If you have over £16,000 in savings you cannot claim Universal Credit.

You’ll lose £4.35 of universal credit per £250 of savings for you have between £6,000 and £16,000.


So if you have £8,500 in savings you’ll loose £43.50 from your monthly universal credit (£8,500 – £6,000 = £2,500; £2,500÷£250*£4.35).

How Working Affects Your Universal Credits

Universal Credit does not stop you from working.

However, once you start earning a certain amount you’ll find that your credits will start to be reduced by the Work Allowance.

The Work Allowance

The monthly work allowance is the amount you are allowed to earn before your credits are reduced and eventually stopped.

Your universal credits will be reduced by 63p for every £1 you earn above the monthly work allowance.

Here are the monthly work allowance rates for 2019/2020:

Your circumstancesMonthly Work Allowance
You get help with housing costs£198
You do not get help with housing costs £409


You have a child and do not get help with housing costs in your Universal Credit payment.

You’re working and earn £750 during your assessment period.

Your work allowance is £409. This means you can earn £409 without any money being deducted.

For every £1 of the remaining £341 you get, 63p is taken from your Universal Credit payment.

£341 x £0.63 = £214.83.

This means if you earn £750 and £214.83 is deducted from your Universal Credit.

Surplus earnings

If you have a good earning month where your income is more than £2,500, over the amount where your payments stop, then these earnings become surplus earnings.

These earnings will be carried forward and count towards your earnings in future months.

Once your surplus has gone, you’ll be able to get a Universal Credit payment again.

Universal Credit and Housing Costs

You can get help towards paying your housing costs only if you are eligible for universal credits as well.

You additional Housing Payment can cover:

  • Rent paid to a private landlord or housing association;
  • Mortgage interest.

Depending on your circumstances there may be a restriction placed on your claim depending on the size of your house and the number of bedrooms you have.

How to Claim Universal Credit

You’ll need to apply online for your Universal Credit providing personal information and confirming your identity including:

  • bank details;
  • email address
  • your National Insurance number
  • information about your housing
  • details of your income, savings and investments
  • driving licence
  • passport

Need Help with Your Application?

If you need help with your application for Universal Credit then call the helpline on:

Universal Credit helpline
Telephone: 0800 328 5644
Monday to Friday 8am to 6pm

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About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek and money nerd helping financial DIY-ers organise their money so they can hit their goals quicker.