Millions of people in the UK who receive Universal Credit (UC) could see their payments reduced or withdrawn entirely, depending on how much they earn from work. The Department for Work and Pensions (DWP) has set earnings limits that, when exceeded, lead to immediate changes in the amount of benefit awarded.
Claimants are not limited by the number of hours they work, but by their total income. If either they or their partner earn above a certain amount, it can result in a lower UC award—or losing it altogether. The DWP has confirmed that other sources of income, including savings and self-employment, are also assessed.
Income Thresholds and How Deductions Are Calculated
The DWP applies a taper rate system to calculate how much Universal Credit a person receives as their earnings increase. According to Express, claimants lose 55p from their UC payment for every £1 they earn above their work allowance—the amount they can earn before deductions begin. There are two key thresholds:
- Claimants receiving housing support or living in temporary accommodation have a lower work allowance of £411 per month.
- Those not receiving help with housing are permitted to earn up to £684 per month before deductions apply.
These figures are fixed and apply only to income from employment. Claimants who are self-employed are responsible for reporting their monthly income themselves, while those in traditional employment typically have their wages reported directly to the DWP by their employer through the Real Time Information (RTI) system used by HMRC.
Other Income Sources and Savings Can Reduce or Remove Benefits
The DWP also considers non-wage income when calculating Universal Credit eligibility and payment levels. Savings and investments are subject to strict limits. If a claimant has over £6,000 in savings, their UC is reduced by £4.35 for every £250 above this amount. Once savings reach £16,000, claimants become ineligible for UC entirely.
This assessment includes money held in bank accounts, cash savings, stocks, shares and other accessible financial assets. Partners’ savings are counted jointly, which means the household total is evaluated, not just individual holdings.
The rules also apply to income from pensions, maintenance payments or rental properties. According to the DWP, these measures are in place to ensure that Universal Credit supports those on low incomes and with limited financial resources, while encouraging a transition into full-time employment where possible.
