Universal credit: Calculating universal credit
This section of the site takes you through the steps needed to calculate Universal Credit entitlement.
Assessment periods
Step 1: Calculate the maximum amount
Step 2: Calculate earned income
Step 3: Calculate unearned income
Step 4: Deduct income from maximum amount
Step 5: Benefit cap
Step 6: Transitional protection
Calculators
Assessment periods
The amount of UC that a claimant is entitled to is calculated over a monthly assessment period. An assessment period begins on the first day of entitlement to UC and lasts for one calendar month.
Each subsequent assessment period begins on the same day of month with two exceptions:
- If the first date of entitlement falls on the 31st of the month, each assessment period begins on the last day of the month.
- If the first date of entitlement falls on the 29th or 30th of the month, each assessment period begins on the 29th or 30th of the month except for February when it begins on the 27th day or 28th day in a leap year.
It is important to be aware of these deviations from the usual assessment period rules which are applied automatically, especially if the claimant’s normal pay date also coincides with the end of the month and the start of their assessment period. This is because some people can encounter a ‘two pays in one assessment’ period issue which means that 2 paydays fall into the same assessment period and then none in the subsequent or prior period.
Example
Jack makes his first claim for UC on 18 September. His first monthly assessment period starts on the 18 (the first day of entitlement) and runs up to and including 17 October. His second assessment period starts on the 18 October and runs up to and including 17 November.
Step 1: Calculate the maximum amount
Universal Credit is made up of several elements which are added together to reach a maximum amount which is then adjusted or tapered to reflect any relevant household income, capital etc. The benefit cap will then be applied, where relevant, and the remaining tapered amount is then paid to the claimant on a monthly basis.
All awards will include the appropriate standard allowance, which is dependent on the age of the claimant(s) and whether it is a joint or single claim.
Then an amount is added for each of the elements that apply to the circumstances during the monthly award period. Advisers should note that some elements cannot be paid together, even if the claimant meets the criteria - for example, it is not possible for one claimant to claim both the carer element and the limited capability for work related activity element together.
This gives the ‘maximum amount’
Step 2: Calculate earned income
Earned income is as defined in the Universal Credit Regulations 2013. You can find more in our what is income section.
In joint claims, it is the combined income of both members of the couple that is relevant.
Once you have determined what the claimant’s earned income (or their joint earned income in a couple claim) you must then deduct the correct ‘work allowance’ for their circumstances. Any income or earnings below the work allowance level are effectively ignored as they are covered in full by the work allowance.
Work Allowance
The amount of reduction depends on the household circumstances and varies according to whether the claimant (or either claimant in a joint claim) has children and/or is eligible for the housing costs element).
If the housing element is included in the maximum amount, then the lower work allowance applies, if housing element is not included, then the higher work allowance applies.
The following table sets out the different work allowances (see our Rates section for allowances over the years):
|
|
Higher Work Allowance |
Lower Work Allowance |
|
Single claimant
|
2024-25 | 2024-25 |
|
Not responsible for a child/qualifying young person |
nil | nil |
|
Responsible for 1 or more children/qualifying young people |
£673 | £404 |
|
Has limited capability for work |
£673 | £404 |
|
Joint claimants
|
||
|
Neither responsible for a child/qualifying young person |
nil | nil |
|
Responsible for 1 or more children/qualifying young people |
£673 | £404 |
|
One or both have limited capability for work |
£673 | £404 |
Applying the taper
A taper must then be applied to any earned income that is remaining after the work allowance has been deducted.
Before April 2017, the taper rate was 65%.
From April 2017, the taper was reduced to 63%.
From 24 November 2021, the taper was further reduced to 55%. This means that for each £1 of earned income over the work allowance (where the claimant is entitled to a work allowance), the maximum amount of UC is reduced by 55p.
The amount left is the ‘earned income’ that is carried to Step 4.
Example (2022/23 tax year)
Julia has one child and claims UC. Her earned income is £1,000 per month. She has no housing costs. Julia is therefore entitled to a higher work allowance of £673. Her earned income calculation will be:
|
Earned income: |
£1,000 |
|
Less work allowance: |
(£673) |
|
Difference |
£327 |
|
Apply 55% taper (£427 x 55%) |
£179.85 |
£234.85 of Julia’s income will be taken into account as earned income for UC and will reduce her maximum amount (see Step 4)
Step 3: Calculate unearned income
Unearned income is also defined in the Universal Credit Regulations 2013. You can find out more about what constitutes unearned income in our what is income section.
Unearned income also includes any tariff income from capital.
With unearned income, unless the income source is specifically ignored it will be taken into account in full and reduce UC £1 for £1. There are some special rules for unearned income that allow it to be averaged over various periods.
Step 4: Deduct income from maximum amount
From the maximum amount calculated under Step 1, the earned income calculated under Step 2 and the unearned income (including tariff income from capital) under step 3 must be deducted. This gives the UC entitlement.
This is the maximum monthly amount a household can receive from certain benefits. There are several exceptions to the Benefit Cap rules which means it doesn’t always apply. See Benefit Cap section.
The Benefit Cap is currently (2022/23) set at:
- Outside of Greater London Borough -
- Couple (with or without children) or a single parent - £423.46 a week (£1,835.00 per UC assessment period)
- Single person without children - £283.71 a week (£1,229.42 per UC assessment period)
- If you live in a Greater London Borough
- Couple (with or without children) or a single parent - £486.98 a week (£2,110.25 per UC assessment period)
- Single person without children - £326.29 a week (£1,413.92 per UC assessment period)
If the Benefit Cap applies, the amount of Universal Credit award under Step 4 is reduced by the excess amount.
Firstly, the amount of excess must be calculated. This is the amount that the UC entitlement (plus any of the other benefits included in the benefits cap) exceeds the benefit cap minus any amount included in the award for childcare costs. This ensures that childcare costs are protected from the cap. No reduction is applied if the childcare costs exceed the excess amount.
Step 6: Transitional protection
Some people who are ‘managed migrated’ (moved by DWP) to UC will be given transitional protection. This is designed to ensure that they do not lose out in cash terms at the point of transfer from the old benefit to UC.
Where this does apply, an extra amount will be added to the claimant’s UC. See our transitional protection section for more information.
From 27 January 2021, UC claimants who received/were entitled to a severe disability premium with certain benefits (such as IR-ESA, IB-JSA or income support) when they claimed UC will receive an SDP transitional element.
There are some third-party benefits calculators than can help calculate UC and any other benefits your client may be entitled to:
Last reviewed/updated 28 August 2024