Across the country, both employed and self-employed individuals claim Universal Credit to support their low or unpredictable levels of income. This provides a top-up in their earnings but, due to the Universal Credit taper rate, will decrease as they begin to earn more.
At the moment, the taper rate is set at 63%. This means that for every £1 that an individual earns, they will only keep 37p. However, in the most recent Budget, the Chancellor confirmed that this rate will now be cut to 55%, increasing the amount that individuals keep to 45p. This will be put into place as of the 1st of December 2021 and will be calculated after tax and NIC deductions.
Will The Work Allowance Also Increase?
For those who claim Universal Credit but have children or a limited capacity for work, a ‘work allowance’ is granted. This is the amount that they can earn without having any reductions down to the taper rate. This is set at £293 a month or £515 a month, based on whether the Universal Credit award also covers a percentage of their rent. In the recent Budget, it was also announced that the ‘work allowance’ will increase by around £42 a month or £500 per year, again as of the 1st of December 2021.