What is Universal Credit?
Universal Credit is a new benefit for working age people that replaces a number of existing benefits and tax credits. It is designed to support people who have a low (or no) income with their basic living expenses and housing costs.
The amount you can get depends on your circumstances and how much other income you have. You can continue to get Universal Credit if you are in work but have low earnings. For more information see our guide to how Universal Credit is worked out.
The main difference between Universal Credit and existing benefits is that Universal Credit is paid once a month on the same date each month. The government say this is so that receiving benefits is like getting paid when you are in work.
Although Universal Credit is made up of different elements it is paid to you as one amount. This means the money to help with your housing costs is usually paid direct to you once a month and not to your landlord so you will be responsible for ensuring your rent is paid. For more information about this see our guide on Universal Credit and Housing Costs.
Universal Credit is also different because it is administered by one benefit department; the DWP, whereas previous benefits are paid by a range of different departments.
Most people will claim Universal Credit online. For more information, see our guide to online claims.
If you have an employer and are paid through the PAYE system then when your wages change your Universal Credit will also change so you don’t have to keep handing in wage slips if your income changes. Ask your employer if you are not sure if you are paid under this system.
If you are self-employed you will need to have records to show how you run your business, such as a business plan, invoices and receipts. Your Universal Credit payment will be based on your actual earnings if you have been running your business for less than 12 months. This is called a ‘start-up period’.
If you have been running your business for more than 12 months the DWP will assume you earn at least an amount called the ‘minimum income floor’. This is usually the minimum wage times by 35 hours a week, minus an amount for tax and NI.
Which benefits is it replacing?
Over a number of years the following benefits and tax credits will be abolished as Universal Credit replaces them:
Income-based Jobseeker’s Allowance
Income-related Employment and Support Allowance
Child Tax Credit
Working Tax Credit
Other benefits that are not means-tested will continue to be paid separately such as Disability Living Allowance, Personal Independence Payment and Carers Allowance. Child Benefit will also continue to be paid separately.
Benefits based on National Insurance contributions, such as contribution-based Jobseeker’s Allowance and contributory Employment and Support Allowance, will not be replaced and will work alongside Universal Credit.
Benefits for those over the state pension age, such as the state pension and pension credit, will also not be replaced. Neither will Council Tax Support so you should check to see if you can claim it in addition to Universal Credit.
Who can claim?
Universal Credit is payable to people out of work, including people looking for work and people unable to work due to illness, disability or childcare commitments and to people caring for disabled people or those in work and on low incomes.
The government is slowly rolling out Universal Credit in stages. For more information on where Universal Credit is currently available and who can claim see our Universal Credit roll out guide.
Will you need to look for work while claiming?
Receipt of Universal Credit is dependent on you agreeing to sign a Claimant Commitment.
This means that everyone who claims is placed into a group that determines what they have to do in order to continue receiving the benefit. The four groups include:
People in this group are deemed ready for work and are expected to actively seek and be available for work.
People in this group are not considered ready for full-time work but are expected to prepare themselves for going into work. This group includes people with a disability or health condition which means they have a limited capability for work.
People in this group are not expected to look for work but are required to attend occasional work focused interviews to ensure they do not lose touch with the labour market. This group includes lone parents and primary carers for children between the age of one and three.
People in this group have no work condition as they are not considered to be able to work at all. This includes people with a disability or health condition which prevents them from working or who are carers, lone parents or the primary carer for a child under the age of one.
If a person is in work and earning over the set amount for their circumstances they are exempt from the conditions of their group. If they earn below the threshold set for them, they would still have to follow the claimant conditions set for them e.g. looking for extra work if they only do a few hours a week.
Anyone who breaks one of the conditions of their commitment may be sanctioned and lose some or all of their benefit.