What is the Earnings Limit for UC?

Universal Credit is a means tested benefit – so it’s all down to your personal circumstances and income.

NOTE: when it’s a couple claim – ‘you’ refers to both members of the couple.

NOTE: Illustrative example are based on figures for 2020/21 rates

The Calculation

As UC is a means tested benefit, the first stage of the calculation is to work out the ‘Maximum UC’ you could be entitled to: this represents the minimum level of income the government feels you need given your personal circumstances.

The ‘Maximum UC’ amount includes: amounts for household members (ie you and any dependent children); Elements for specific situations (e.g. carer, disabled child, limited capability for work/work related activity, child care costs); and a Housing Costs Element if you are liable to pay rent.

All of the Elements that you are entitled to are added together to work out what your ‘Maximum UC’ will be. This is then reduced by earnings and/or unearned income you have, until the income is high enough to mean there is no entitlement left.

This means that the higher your Maximum UC amount, the more you can earn and still have an entitlement. 

This assessment is made every month, based on the your circumstances at the end of the monthly Assessment Period.

Do earnings reduce the award £1 for £1?

No. The DWP will take account of the net wages received during each monthly Assessment Period.

These will reduce your ‘Maximum UC’ by 63p for each £1 above any applicable Work Allowance (earnings disregard).

You are eligible for a Work Allowance if you are responsible for children who live with you, or if you have been found to have, or are treated as having, a Limited Capability for Work. A claimant who is self-isolating under government rules on the last day of their monthly Assessment Period should be treated as having a Limited Capability for Work. 

See How does UC work for workers for more information on the Work Allowance.

So how much can someone earn?

That all depends on their ‘Maximum UC’ and whether or not they qualify for a ‘work allowance’. A couple aged over 25, with two children, and £500 eligible housing costs, would stop being entitled to UC when they earned £2680.00 net a month or around £42,000 gross pa (assuming just one of them is working).

Whereas a single 24 year old with no rent to pay would stop being entitled to UC once they earned £400 net a month! 

Examples: The following table assumes that the claimant has no unearned income and that their Maximum UC includes a Housing Costs Element. 

NOTE: The maximum salary that someone could receive before UC ends would be higher with a higher Housing Costs Element

Household	Max net monthly earnings before entitlement to UC is nil	Estimated max gross annual salary before entitlement to UC is nil*
Single, under 25 year old, £300 eligible housing costs, no extra elements	£1013.32 net	£12,500 gross
Single, over 25 year old, £300 eligible housing costs, no extra elements	£1,136.07net	£14,700gross
Single, over 25, Limited Capability for Work (pre April 17) and £300 eligible housing costs	£1,705.42 net	£1,705.42 net
Couple, over 25, no children, no extra elements, £500 eligible housing costs	£1,836.20net	£27,000 gross
Single parent, over 25, with one child born before April 2017, no other elements and £500 eligible housing costs.	£2,348.35 net	£36,000 gross
Couple aged over 25, with 2 children born before April 2017, no other elements and £500 eligible housing costs.	£3,112.25 net	£49,500 gross
Couple aged over 25, with 3 children born before April 2017, one lower disabled child premium, one carer addition, and £600 eligible housing costs.	£4,620.80 net	£73,250 gross
Couple, over 25, 4 children born before April 2017, one higher disabled child premium, one carer addition, one LCWRA element, £500 eligible housing costs	£5,632.12net	£102.000 gross
* Assumes one earner per family with basic tax code ie no deductions