Glossary · UK
What is Universal Credit Work Allowance?
The amount a Universal Credit claimant with children or limited capability for work can earn before their award starts to be reduced by the taper rate, set at different levels depending on whether they also receive help with housing costs.
Full Definition
The work allowance is the amount of monthly earnings a Universal Credit claimant can receive before their Universal Credit award begins to be reduced under the taper rate. It applies only to claimants who are responsible for a child or qualifying young person, or who have limited capability for work, reflecting a policy choice to let these groups keep more of their earnings before Universal Credit starts to be withdrawn, compared with claimants without children or a health condition, who have no work allowance and see their award reduced by the taper rate from the first pound earned. There are two levels of work allowance: a higher work allowance for claimants who do not receive the housing costs element of Universal Credit (because, for example, they own their home outright or have no rent liability), and a lower work allowance for claimants who do receive help with housing costs. The higher allowance is set at a larger monthly amount specifically because claimants without the housing element are not already receiving that additional support, while the lower allowance reflects that housing costs are being met separately within the same award. Once a claimant's earnings in an assessment period exceed their applicable work allowance, Universal Credit is reduced by the taper rate (55p for every 1 pound of earnings above the allowance) on the excess only, not on the whole earnings amount. For example, a single parent with the lower work allowance who earns 1,000 pounds in an assessment period, against a work allowance of around 400 pounds, would have the taper applied only to the 600 pounds above the allowance, losing 330 pounds of Universal Credit (55% of 600 pounds) rather than having the full 1,000 pounds tapered. Because the work allowance and taper interact to determine how much better off a claimant is for each additional pound earned, it is a central figure in modelling whether increasing hours or taking a pay rise leaves a Universal Credit household meaningfully better off.