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‘What is Universal Credit?’
> ‘I'm single, have no children, and am not fit for work’

What do you claim?

Let’s say you have recently become too ill to work, have left work, and have no benefits at all. Until Universal Credit reached your area you would have contact the Jobcentre Plus and asked to claim Employment and Support Allowance, as well as Housing Benefit and Council Tax Support.

You might think that all you need to claim is Universal Credit. After all, that would seem to be the point of the thing. However, you would be wrong. Remember that contribution based Employment and Support Allowance has not been abolished, so unless you’re absolutely sure that you do not have enough National Insurance contributions to qualify you for contribution based Employment and Support Allowance, you need to claim this as well as Universal Credit.

However, from now on I will assume that you don’t actually get any contribution based Employment and Support Allowance, either because your NI record is not good enough or you have already been getting it for the maximum 12 months.

What do you get?

The odd thing is that, despite all the excitement about Universal Credit, unless you are in the support group (click here for information about being in the support group). the amount you get if you not fit for work is about the same as what you would get on Employment and Support Allowance (contribution based or income based)
The only real differences, in terms of what you actually receive, are:
If you have been placed in the support group, you actually get more than what you would have got on Employment and Support Allowance: you will get £145.38 per week (£633.42 per month). This compares with £109.30 (contribution based Employment and Support Allowance) or £125.05 (income based Employment and Support Allowance). Unlike the extra amount for people in the work-related activity group, you can still get this extra amount if your claim for UC started on or after 3rd April 2017.

(It’s not all good, though. Some people get extra income based Employment and Support Allowance because they receive Attendance Allowance, the middle rate of the component of Disability Living Allowance or the middle rate of the daily living component of Personal Independence Payment: this extra bit (called the ‘severe disability premium’) can’t be included in Universal Credit.)

Whichever of the three situations you fit into, if you have other income (apart from earnings) or savings these get treated in just the same way as they would for income based Jobseeker's Allowance.

What if you start work?

The thing about Universal Credit is that it’s not just for people who are unfit for work: people who are looking for work are claiming it too. The idea is that this should help you if you have been ‘on the sick’ but want to try work.

However the government has to strike a balance here: if they keep paying people extra money because they are supposedly unfit for work but they are also holding down a full-time job, it doesn’t seem very fair on other people.

So the good news is that you can work  and carry on getting Universal Credit (but don't forget to tell them), but they are then likely to re-assess you to see if you are still entitled to the extra bits you get because of being unfit for work.

icon-example1.jpgDavid is 43, single, and has limited capability for work but is not in the support group (click here for more information about this). His claim for UC started before April 2017. He gets no Disability Living Allowance. To make things as simple as possible, we’ll say that he gets no contribution based Employment and Support Allowance. He rents from a private landlord: his eligible rent is £80 per week (£347.62 per month).

Before he starts work he receives £791.55 per month (£182.16 per week):
  • £443.93 per month, (£102.16 per week) is just what he would have got on income based Employment and Support Allowance.
  • £347.62 per month (£80 per week), is just what he would have got on Housing Benefit.
This figure of £791.55 per month is called his Maximum Universal Credit because this is the maximum he can get, based on his circumstances: if he has any other income he may get less.
He then finds a part time job, for 15 hours per week, which pays £411 per month (about £94.59 per week).

The rules say that as David is single, has limited capability for work, has no children, and rents his home, he is allowed to earn up to £198 a month before his Universal Credit is affected. This figure is called his work allowance*.

However, as he earns more than £198 per month, his Universal Credit is reduced by a 63p for every pound he earn above this (in other words he loses 63% of any earnings above £198)(This figure, brought in in April 2017, is a slight improvement on the previous figure of 65%.).

  • David's earning exceed £198 by £213 (£411 - £198)
  • For David, this means that his Universal Credit is reduced by £134.19 (63% of £213).
  • This means that he receives £657.36 Universal Credit per month (£151.28 per week)
  • So his earnings go from nothing to £411 per month, but his Universal Credit goes down by £134.19.
  • This means that he is £276.81 per month better off (about £63.70 per week).

*If you’re wondering where the £198 work allowance figure comes from, I've put a full table of work allowances here.

But supposing he gets reassessed, and they decide you are not really unfit for work now?

icon-example1.jpgDavid’s is now re-assessed, and the Jobcentre Plus decides that he is now fit for work (technically, he now doesn't have a limited capability for work). This changes two things:
  • David’s Maximum Universal Credit amount is now only £665.44 per month (£317.82 for living expenses plus £347.62 for housing costs). This works out as £153.40 per week. Compare this with the 791.55 per month he was getting when he was classed as unfit for work.
  • Also, now, His work allowance is now £0*, not £198, so his Universal Credit is reduced from the £665.44 by 63% of his total earnings, i.e. by £258.93 per month (63% of £411).
  • His actual Universal Credit is now, therefore, £406.51 per month (£665.44 - £258.93), or £93.55 per week
As you can see, there's a double whammy here: by becoming fit for work the maximum amount he can get goes down, and more of his earned income is taken into account as well.

*Sadly, this is a change from the Universal Credit rules as originally designed. Until April 2016 you, as a single job-seeking claimant with no children, your work allowance would have been £111, not £0.

Let's compare all three situations and see how things look on a weekly basis (the final column shows what a job-seeker would have got before the rules changes in April 2016):

Not working
Starts working
Reassessed as fit for work
Reassessed as fit for work (pre-2016 rules)
David's weekly earnings 0
£94.59 £94.59
David's weekly Universal Credit £182.16 £151.28 £93.55
David's total income £182.16 £245.87 £188.14

Don't forget that he has to pay his rent, £80 per week, out of these payments.
So yes, David does end up being better off for working, but because he has also been found fit for work as well he is not that much better off.

There are, as you might expect, a lot of complications. I'll discuss these in a later version of these pages.

Any other catches?

Well. The problem is that if you get any Universal Credit at all, you still have to keep to your claimant commitment, although it might be amended to take into account the fact that you are working. This means that if you get a part-time job you may still be required to show that your looking for more work.

This is still a very new benefit so it’s unclear how this will pan out in practice.

How are your earnings assessed?

If you’ve had any experience with working and claiming income based Jobseeker's Allowance in the past, you’ll know what a hassle this can be, having to inform them every time your wages go up and down, and often having to end claims and then reclaim again.

Universal Credit doesn’t work like this. Although you still have responsibility to keep them informed of any changes, including changes in earnings, the idea is that because employers are now obliged to report what they pay employees to Her Majesty’s Revenue & Customs on an ongoing basis, and HMRC will in turn pass this information onto the Jobcentre Plus. So hopefully you should see your Universal Credit go down when your earning go up without you doing anything.

Also, because of the way Universal Credit works, you won’t have to keep ending and restarting your benefit claims just because your hours go up and down, for example.

icon-warning1.jpgAlthough changes in earnings should be taken into account by the Jobcentre Plus automatically, remember that the responsibility is yours. If your earnings do not appear to be affecting your Universal Credit, or if, say, your employer is not passing the information to Her Majesty’s Revenue & Customs, it’s down to you to keep the Jobcentre Plus informed.