Universal Credit is a financial support scheme claimed by over six million people in the UK. However, the amount you receive depends on factors such as savings, earnings, and eligibility criteria set by the Department for Work and Pensions (DWP). If you have significant savings or investments, your Universal Credit payments may be reduced or even stopped. Additionally, payment rates are set to increase in April 2024. This article breaks down how savings impact your claim, how earnings affect payments, and the new rates you can expect.
How Savings Affect Universal Credit Payments
Your Universal Credit entitlement is influenced by your cash savings, investments, and assets. The rules are as follows:
- If your savings are below £6,000, your payments remain unaffected.
- If you have between £6,000 and £16,000, your Universal Credit is reduced by £4.35 for every £250 saved over £6,000.
- If your savings exceed £16,000, you do not qualify for Universal Credit.
Example Calculation:
If you have £6,300 in savings:
- The first £6,000 is ignored.
- The extra £300 is divided into £250 blocks (1 full block plus an additional amount).
- A deduction of £8.70 (£4.35 × 2) is applied to your Universal Credit payment.
These rules apply whether you’re a single applicant or part of a couple. However, those transitioning from Tax Credits to Universal Credit may still be eligible for up to a year, even if their savings exceed £16,000.
How Earnings Affect Universal Credit Payments
Universal Credit is designed to decrease as your earnings increase through a system called the taper rate.
- The taper rate is 55%, meaning for every £1 you earn, your Universal Credit is reduced by 55p.
- Some people qualify for a work allowance, which is an amount you can earn before deductions apply.
Work Allowance Rates (April 2024 Increase):
- Higher work allowance (no housing costs included): £673 → £684 per month
- Lower work allowance (with housing costs included): £404 → £411 per month
If your earnings are below your work allowance, your Universal Credit remains unchanged. However, once your earnings exceed this threshold, the 55% taper rate applies.
Universal Credit Payment Increases (April 2024)
From April 2024, Universal Credit payments will rise by 1.7%. However, since Universal Credit is paid in arrears, most recipients may not see the increase until May or June 2024.
Updated Universal Credit Standard Allowance
| Category | Current Rate | New Rate (April 2024) |
|---|---|---|
| Single under 25 | £311.68 | £316.98 |
| Single 25 or over | £393.45 | £400.14 |
| Joint claimants both under 25 | £489.23 | £497.55 |
| Joint claimants, one or both 25 or over | £617.60 | £628.10 |
Updated Child Element Rates
| Category | Current Rate | New Rate (April 2024) |
|---|---|---|
| First child (born before April 6, 2017) | £333.33 | £339.00 |
| First child (born on or after April 6, 2017) or second/subsequent child | £287.92 | £292.81 |
| Disabled child element (lower rate) | £156.11 | £158.76 |
| Disabled child element (higher rate) | £487.58 | £495.87 |
Updated Limited Capability for Work Payments
| Category | Current Rate | New Rate (April 2024) |
|---|---|---|
| Limited capability for work | £156.11 | £158.76 |
| Limited capability for work or work-related activity | £416.19 | £423.27 |
Updated Carer Element
- Current Rate: £198.31
- New Rate (April 2024): £201.68
Updated Childcare Cost Element
| Category | Current Rate | New Rate (April 2024) |
|---|---|---|
| Maximum for one child | £1,014.63 | £1,031.88 |
| Maximum for two or more children | £1,739.37 | £1,768.94 |
Understanding how savings, earnings, and new payment rates affect your Universal Credit claim is crucial for financial planning. If you have savings above £6,000, expect a reduction in your payments, and if your savings exceed £16,000, you may lose eligibility.
The 55% taper rate ensures that Universal Credit decreases as your income rises, though work allowances help reduce immediate deductions. With payments increasing from April 2024, claimants should prepare for a small boost in their benefits, though this will likely be reflected in May or June payments. Staying informed about these changes can help individuals maximize their Universal Credit benefits while planning for financial stability.
FAQ
How do savings affect Universal Credit?
If you have over £6,000 in savings, your Universal Credit is reduced. If you have over £16,000, you are not eligible.
What is the Universal Credit taper rate?
The taper rate is 55%, meaning your Universal Credit decreases by 55p for every £1 you earn above your work allowance.
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