How Universal Credit is worked out

Universal Credit payments are worked out in 3 steps.

Step 1 - Maximum Universal Credit

First, the basic parts of Universal Credit that apply to you are added together to give your maximum Universal Credit.

For everyone this includes a standard allowance - an amount for you (and your partner if you have one). The level of this standard allowance is the same as for existing out-of-work benefits such as Jobseeker's Allowance. Extra amounts are then added on if any of the following apply to you:

• Child Element - for each child you have plus an additional amount if any child has a disability (called the Disabled Child Element). Please note, this is subject to the 2 child limit where, since 6 April 2017, in most cases, support is limited to two children. See our exemptions guide to check if you are excluded from these rules.
• Childcare Element - to help with up to 85% of relevant childcare costs
• Disability elements - there are two rates, a Limited Capability for Work (LCW) element and a Limited Capability for Work & Work-Related Activity (LCWRA) element which is higher. The LCW element is not available for new claims from April 2017 with a few exceptions.
• Carer Element - to support a person providing a significant amount of care to someone with a disability
• Housing Element - to help towards relevant housing costs

Step 2 - Reduction in Universal Credit for income and earnings

Universal Credit then takes into account any:

• earned income
• savings and capital between £6,000 and £16,000 (if above £16,000 you will not be eligible for Universal Credit unless you are being moved from an old 'legacy' benefit via the managed migration process)
• other benefits received
• any other income (e.g. a pension)

The amount your maximum Universal Credit will be reduced by depends on the type of income you have. For earnings the reduction is 55p for every £1 earned over your work allowance - the amount you are allowed to earn before your Universal Credit is reduced.

For benefit income and other non-work income the reduction is £1 for £1 of income.

For savings the first £6,000 of your savings is not counted as income (but it should still be reported). For savings between £6,001 and £16,000 each £250 (or part of £250) means £4.35 will be taken from your monthly Universal Credit award.

Step 3 - Other reductions in Universal Credit

Finally Universal Credit takes into account any special rules that might affect you, such as the benefits cap.

Universal Credit may also be reduced to take account of deductions from benefits. This includes things like repayment of social fund loans or benefit advances, sanctions associated with the claimant commitment and deductions associated with benefit over-payments or debts to third parties collected through benefits called Third Party Deductions.

Universal Credit rates from April 2024

To find out the Universal Credit rates for the current year see Universal Credit Rates.

See how you will be affected by Universal Credit

Use our benefits calculator to see how you will be affected by Universal Credit. It's free and easy to use. Just fill in your details and select the 'How much would you get under Universal Credit?' option from the results page to see how you'll be affected. To get your entitlements under Universal Credit start the benefits calculator now.