Introduction to Employment and Universal Credit
Universal Credit is a benefit designed to help people with their living costs if they are on a low income or out of work. It replaces several older benefits and aims to simplify the support available for those who are working, looking for work, or unable to work due to health or caring responsibilities.
Your employment status plays a key role in how much Universal Credit you receive. When you start, stop, or change work, your earnings and any employment benefits you receive are taken into account. Universal Credit payments are adjusted based on your income, following rules set out by the Department for Work and Pensions (DWP). This means that if your earnings go up, your Universal Credit is likely to go down, and vice versa.
It’s important to understand how your earnings affect your payments and to report any changes in your work situation promptly. Failing to update Universal Credit about changes in your job or income can affect your entitlement and may lead to overpayments or penalties.
Universal Credit also interacts with other types of support, such as help with childcare costs or housing, and works alongside other benefits you may be entitled to. For a broader understanding of how Universal Credit works and what you need to do while claiming, make sure to stay informed and keep your details up to date.
How Earnings Affect Your Universal Credit
When you start earning money from work, your Universal Credit payments will usually go down. Universal Credit is worked out on a monthly basis, using an assessment period. During each period, your earnings are added up to calculate how much Universal Credit you’ll receive the following month.
Generally, for every £1 you earn, your Universal Credit payment reduces by 55p. However, some people are entitled to a ‘work allowance’. This is the amount you can earn before your Universal Credit starts to be reduced. You may qualify for a work allowance if you’re responsible for a child or have a disability or health condition that affects your ability to work.
It’s important to know that Universal Credit calculations use your gross earnings (your pay before tax and National Insurance are taken off), not your net pay. This can sometimes make your payments change in ways you might not expect.
Reporting your earnings accurately and on time is essential. If you don’t, you could be paid too much or too little, leading to overpayments you may have to pay back, or missing out on money you’re entitled to. If your circumstances change, such as starting a new job or getting a pay rise, you should check if a change affects your Universal Credit.
For more detailed rules on how your earnings are assessed, you can look at Universal Credit Regulations 2013, Regulation 30.
Starting, Changing, or Stopping Work
When you start, change, or stop work while claiming Universal Credit, it’s important to understand how these changes can affect your payments.
Starting a new job:
If you begin a new job, you must report changes to Universal Credit as soon as possible. Universal Credit is designed to adjust as your earnings change, so your payment may go up or down depending on your income. The government uses a real-time information system to track your earnings, but you are still responsible for reporting when you start work, your expected hours, and your pay details.
Changing your hours or pay:
If your working hours or your rate of pay changes, this can also affect your Universal Credit. You should report any changes promptly, as delays could lead to overpayments or underpayments. Generally, for every £1 you earn above your work allowance, your Universal Credit payment reduces by 55p.
Stopping work or losing your job:
If you stop working or lose your job, you must let Universal Credit know straight away. Your payment may increase if your earnings go down, but only once you’ve reported the change. Acting quickly helps avoid gaps in your support.
Reporting requirements:
You are legally required to tell Universal Credit about any changes to your work situation as soon as they happen. Failing to do so could result in incorrect payments or even penalties. To stay up to date, always report changes to Universal Credit promptly.
Impact on payments and budgeting tips:
Your Universal Credit payment may change each month depending on your earnings. It’s a good idea to budget for possible fluctuations, especially if you have variable hours or income. Reviewing your monthly statements can help you keep track of any changes.
For more guidance on how employment changes might affect your Universal Credit, see the government’s advice on when and how to report changes to Universal Credit.
Claiming Universal Credit While Working Part-Time
If you work part-time, you can usually still claim Universal Credit, but the amount you receive may change depending on your earnings. Universal Credit is designed to top up your income, so as you earn more from part-time work, your Universal Credit payments will gradually reduce. Your employer will report your earnings directly to the Department for Work and Pensions (DWP), and these will be used to calculate your monthly payment.
Working part-time can be beneficial, as you continue to build work experience and maintain your Universal Credit claim. There are specific rules around how your earnings are counted, including the application of any work allowances, which let you keep more of your earnings before your Universal Credit is reduced.
For a detailed explanation of how part-time work affects your claim, including how your payments are calculated and what you need to report, see our guide on claiming Universal Credit while working part-time.
Universal Credit for Self-Employed Individuals
If you’re self-employed and claiming Universal Credit, your income is assessed differently compared to someone who is employed. The amount you receive can be affected by how much you earn, the way you report your earnings, and specific rules like the Minimum Income Floor (MIF). The MIF is an assumed level of income that may be used to calculate your Universal Credit payments, even if your actual earnings are lower. You can find a detailed explanation of how the MIF works and when it applies by visiting Minimum Income Floor (MIF).
It’s important to accurately report your self-employed earnings each month, as this directly affects your Universal Credit payments. For step-by-step guidance, see our advice on reporting self-employed earnings.
The rules for self-employed claimants are set out in the Universal Credit Regulations 2013, Regulation 34, which explain how your earnings are calculated and what you need to report.
For a comprehensive overview of how Universal Credit works if you are self-employed – including practical tips and details on managing your claim – see our dedicated guide: Universal Credit for self-employed individuals.
Other Employment-Related Benefits and Support
When you’re working or looking for work, several other benefits may interact with your Universal Credit. Understanding how these benefits connect can help you make informed choices about your finances and what support you may be entitled to.
If you cannot work due to illness or disability, you might be eligible for Employment Support Allowance (ESA). ESA is designed to provide financial help if your health limits your ability to work. You can also check your eligibility and learn how ESA works alongside Universal Credit on the Check if you can claim ESA – Home – Citizens Advice](https://www.citizensadvice.org.uk/wales/benefits/sick-or-disabled-people-and-carers/employment-and-support-allowance/help-with-your-esa-claim/check-if-you-can-claim-esa/) website. For more guidance on [getting Universal Credit if you’re sick or disabled, see our dedicated section.
If you are actively seeking work, Jobseeker’s Allowance (JSA) may be available, although Universal Credit has replaced income-based JSA for most new claimants. If your circumstances change, it’s important to know how this could affect your claim – see Check if a change affects your JSA – Citizens Advice for details.
For those in work but on a low income, Working Tax Credit offers additional support. However, most new claims are now made through Universal Credit, and if you receive a migration notice, you may need to move from tax credits to Universal Credit. For practical advice on what to do if your circumstances change, visit Check if a change affects your tax credits – Citizens Advice.
Help with housing costs is included in Universal Credit, but some people may still receive Housing Benefit. Eligibility depends on your circumstances, such as age, living arrangements, and whether you’re already claiming Universal Credit.
If you have a disability or long-term health condition, extra support is available through Universal Credit, and you may also be entitled to other benefits or allowances. Be sure to report any changes in your work status or health to ensure you receive the correct support.
Keeping Your Universal Credit Claim Up to Date
Keeping your Universal Credit claim up to date is essential to make sure you receive the correct payments and avoid any issues. You must report any changes in your employment, such as starting a new job, changing your hours, or if your earnings go up or down. This is because Universal Credit is calculated based on your current circumstances, and even small changes can affect the amount you get.
You can report changes quickly and easily online. If you’re unsure whether something counts as a change, you can check if a change affects your Universal Credit. Failing to report changes promptly can lead to overpayments, which you’ll have to pay back, and may also result in penalties.
If your income varies from month to month, it’s a good idea to keep records and update your claim regularly to avoid mistakes. Using the online Universal Credit account helps you stay on top of your claim and manage updates efficiently.
For more information on managing your claim, see while you’re on Universal Credit. Staying informed and proactive will help you avoid problems and ensure you get the support you’re entitled to.
