Surplus Earnings in Universal Credit

Every Universal Credit claim has a maximum award. As your income goes up, your Universal Credit decreases until you reach a point where your award drops to £0. This point varies depending on your circumstances. 

If your income exceeds the point at which your Universal Credit drops to £0 by more than £2,500, any amount over that £2,500 excess will be treated as something called surplus earnings and it is carried forward into later assessment periods. The surplus earnings will then be added to any amount you earn in the next assessment period to work out your earned income for that month. 

If your income was so high that your earnings plus your surplus in the second month is more than £2,500 over the point at which your Universal Credit reduces to £0, any surplus that month will be carried over again into the following month. This will carry on each month until you reach a point when you do not earn more than £2,500 over the amount where you do not qualify for any Universal Credit.

This means you cannot earn a lot of money in one month and very little in other periods and still be entitled to full Universal Credit during those later periods.

It is important that you continue to claim Universal Credit in any period that you do not qualify due to surplus earnings.

Your surplus earnings are effectively reduced by £2,500 each month. If you end your claim and then apply again within six months of closing your old claim down, you will not have had your excess income reduced and whatever surplus you had on your file when you last claimed will be added to your next assessment period. 

Example surplus earnings calculation

If you have a maximum Universal Credit entitlement of £617.60 per month (from April 2024), your Universal Credit will drop to £0 if you earn £1,122.91. If you earn £2,500 more than that in a month, any amount over that would be treated as surplus earnings.

In this example, any amount over £3,622.91 would count as surplus earnings and be carried over into your next assessment period.

So, if you earned £5,000 in one month, £1,377.60 would be carried over into the next month’s Universal Credit calculation as surplus earnings.

If you then earned £500 in the next month, the £1,377.09 surplus will be added to the £500 for a total income that month of £1,877.09. This would mean you wouldn’t qualify for any Universal Credit that month either.

As the £1,877.09 amount in the second month is not more than £2,500 over the point that you no longer qualify for Universal Credit, no further surplus earnings will be carried over into the next assessment period.

Self-employed losses

Rules for surplus earnings apply equally for employed and self-employed people. Self-employed people though, are very likely to have fluctuations in their income and expenditure and may have losses as well as profits in their assessment period.

When working out income in a future period, any losses made can be carried over in a similar way to surplus earnings. Any income in the month following a loss will be counted as lower by the amount of the loss in the previous period. So, if you have a loss of £200 in one month and then make a profit of £500 in the following month, you will be counted as having zero income in the first month and making a profit of £300 in the second month.

Surplus earnings and losses from self-employment can be offset against one another. If you are treated as having surplus income in one month and then make a loss in a subsequent month, the loss is subtracted from the amount of surplus earnings to work out the earnings in that month.