Budget 2018: Universal credit work allowance increased

If you're employed, your universal credit reduces as you earn more – for every £1 you earn, your payment reduces by 63p.

But if you or your partner are responsible for a child, or are living with a disability or condition that affects your ability to work, you're eligible for a work allowance. 

The work allowance is a set amount you can earn before your universal credit is reduced.

There are two levels of work allowances, depending on your circumstances:

• If you're getting housing support, you can earn £2,376/year in your pay packet.

• If you're NOT getting housing support, you can earn £4,908/year in your pay packet. 

But from April next year, you'll be able to earn an additional £1,000 a year before your universal credit is affected.

As you won't lose the 63p per £1 on this £1,000, you will get an extra £630 in your pocket.

The Chancellor said the measure is a response to hearing the concerns about the rates and allowances of universal credit.

As part of the Budget, an additional £1 billion was pledged over the next five years to support moving existing benefit claimants onto universal credit.

In short, this means 1.1 million people will get an extra one-off payment from their existing jobseeker's allowance, income support, and income-related employment and support allowance worth an average £200 to cover them for a two-week period.

What is universal credit?

For more on the new system, see our Universal Credit guide. Essentially, universal credit is a monthly benefit payment which replaces six existing means-tested benefits:

• income support

• income-based jobseeker's allowance

• income-related employment and support allowance

• housing benefit

• child tax credit

• working tax credit

It was introduced to simplify the benefits system, but has been plagued by controversy, as many claimants have had to wait up to four extra weeks (a total of nine weeks) to receive their first payment.

Universal credit is being introduced gradually across the country, so some may already be on it. You can only go onto universal credit if you live in an area where it has been fully rolled out, and you either make a new claim or you've had a change of circumstance.