Universal Credit work allowances: how much can you earn before UC is reduced?

Universal Credit is reduced by 55p for every £1 you earn above your work allowance. This is called the earnings taper. Your work allowance is a fixed amount of your earnings that is completely ignored in the Universal Credit calculation. The work allowance rates for 2026-27 are: if you have no housing costs included in your claim, £710 per month; if you have housing costs included in your claim (such as rent), £427 per month. If you earn £400 per month with housing costs included, nothing is above the £427 allowance, so your Universal Credit is not reduced. If you earn £800 per month, £800 minus £427 = £373 is above the allowance, reducing your Universal Credit by 55p × £373 = £205.15 per month.

You only get a work allowance if you, or your partner, are responsible for a child or have limited capability for work because of a health condition or disability. If neither applies, the 55p taper starts from your first £1 of earnings. Work allowances apply regardless of whether you are full-time, part-time, or self-employed. They apply to all forms of earnings including wages, bonuses, commission, and self-employed profit. If you have a joint claim with a partner, both your earnings are combined in the Universal Credit calculation. The work allowance applies to your combined earnings. If either partner earns enough to exceed the household work allowance, the taper applies to earnings above that threshold.

Understanding your work allowance helps you plan how to increase your earnings most effectively. If you are earning close to your work allowance amount, a modest pay rise may not significantly increase your Universal Credit reduction — meaning most of the pay rise comes through to your bank account. The 55p taper is less punitive than it might appear: it means you always keep 45p of every additional £1 you earn above the allowance, which is better than the previous 100% withdrawal rate of legacy benefits. Use a benefits calculator (such as entitledto or Turn2us) to model how different earning levels affect your Universal Credit payment and total household income. As your earnings increase permanently, notify the Universal Credit journal so your payment can be adjusted — if your earnings increase your UC payment will reduce, not increase.