Many employed and self- employed people claim Universal Credit as they have low or unpredictable levels of income. It provides a much-needed top-up to their earnings but the benefit is reduced as the worker earns more due to the Universal Credit taper rate.
Currently the taper rate is 63% which means that for every extra £1 earned the individual will keep only 37p. In the Autumn 2021 Budget, the Chancellor announced that the Universal Credit taper rate will be cut to 55% so that for every extra £1 earned the worker will keep 45p for earnings received from 1 December 2021. Those figures are calculated after deductions for tax and NIC.
Universal Credit claimants who have children or a limited capacity for work are granted a ‘work allowance’. This is the amount that they can earn which is not reduced by the taper rate and is set at £293 or £515 per month depending on whether the Universal Credit award also covers some of their rent. This work allowance will increase by around £42 per month or £500 per year from the same date.
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