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Universal Credit is a financial support system introduced by the government in October 2013.
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 needs some temporary help, including the self-employed.
Universal Credits is a single system that replaces the following benefits:
- Child Tax Credit
- Housing Benefit
- Income Support
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Working Tax Credit
Who Can Claim Universal Credit
You may be eligible to claim Universal Credit if you’re:
- yon a low income or out of work;
- 18 or over (but some people aged 16 to 17 can also make a claim);
- under Pension Credit qualifying age (or your partner is);
- you and your partner jointly have £6,000 to £16,000 or less in savings;
- you live in the UK.
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;
- 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 and 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 circumstances||Monthly Allowance|
|Single and under 25||£251.77|
|Single and 25 or over||£317.82|
|In a couple and you’re both under 25||£395.20 (for you both)|
|In a couple and either of you are 25 or over||£498.89 (for you both)|
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
|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
|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 circumstances||Extra 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 A
ffect 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.
Example of How Savings Affect Universal Credit
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.
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 circumstances||Monthly Work Allowance|
|You get help with housing costs||£198
|You do not get help with housing costs||£409|
Example of the Universal Credit Work Allowance
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. So £341 x £0.63 = £214.83.
This means if you earn £750 and £214.83 is deducted from your Universal Credit.
If you have a good earning month where your income is more than £2,500 over the amount where your universal credit stops, then these earnings are become surplus earnings.
If you need to claim Universal Credit in later months then these earnings will be carried forward and count towards your earnings.
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
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
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
Anita is a Chartered Accountant with over a decade of experience taking self-employed business owners from financially confused to business savvy.
She is the creator of the ‘Go Self Employed’ website, which is her corner on the internet where she makes self-employment less terrifying.