What Universal Credit replaces
UC replaced six older benefits: Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance, Housing Benefit, Child Tax Credit and Working Tax Credit. Most new claimants go onto UC directly. People still on legacy benefits are being moved over through managed migration. Once you are on UC, you cannot switch back to the old system. The migration is now largely complete for tax credit claimants, though some groups are still being moved over in 2026. If you received a migration notice and missed the deadline, you should contact DWP urgently — there are some circumstances where you can still be helped. The key practical difference from the old system is that UC is a single monthly payment covering everything, whereas previously you may have received several separate payments from different parts of the system on different dates.
The standard allowance: your starting point
Every UC award starts with a standard allowance. In 2026/27 this is £424.90 per month for a single claimant aged 25 or over. For couples where both are 25 or over, it is £666.97. Claimants aged under 25 receive slightly less: £311.68 single, £489.23 couple. The standard allowance is the baseline before any additional elements or deductions. The lower rate for under-25s reflects the Government's assumption that younger claimants are more likely to have parental support, though this is a contested policy position. It does not apply once a claimant turns 25 mid-claim — the higher rate applies from the first assessment period after their 25th birthday. Couples where one partner is over 25 and one is under 25 receive the couple rate based on the older partner's age band.
Elements that add to the award
On top of the standard allowance, you can receive additional elements depending on your circumstances. The child element adds £303.94 per child per month (the two-child limit that previously applied to children born after April 2017 was abolished from 6 April 2026, so all dependent children now generate a child element). The housing cost element covers rent up to the Local Housing Allowance rate. The LCWRA element adds £429.80 per month if you have a health condition that limits your capacity for work. The childcare element covers up to 85% of registered childcare costs up to a monthly cap. Elements are not automatic: the child element requires you to have reported a child on your claim, the LCWRA element requires a Work Capability Assessment, and the childcare element must be actively reported each month with cost evidence. A common reason for underpayment is that claimants are not aware they need to actively report certain costs or circumstances, so it is worth reviewing each element with a welfare rights adviser if you think something is missing.
How earnings reduce the award
UC is tapered as you earn more. The taper rate is 55%, meaning you keep 45p of every £1 you earn above your work allowance. If you have children or a health element, you have a work allowance of £427 per month (if you also receive help with housing costs) or £710 per month (if you do not). Earnings below the work allowance do not reduce UC at all. Above it, each £1 earned reduces UC by 55p. For employed claimants, earnings are reported to DWP automatically via Real Time Information from HMRC, so wages are usually picked up without the claimant needing to do anything. Self-employed claimants must report their earnings manually via the UC journal each month, and if actual earnings fall below the Minimum Income Floor (MIF), DWP uses the MIF figure instead. The MIF does not apply in the first 12 months of self-employment, or during a grace period if earnings drop due to circumstances outside the claimant's control.
How savings reduce the award
Savings below £6,000 are ignored. Between £6,000 and £16,000, DWP applies tariff income: for each complete £250 above £6,000, it adds £4.35 per month to your assumed income, reducing UC accordingly. At £16,000 or above, UC stops entirely. These thresholds apply to combined savings for a couple. You must report any change in savings via your UC journal. It is important to understand that the tariff income rule treats savings as if they generate income at a fixed rate, regardless of the actual interest earned — or earned at all. A claimant with £10,000 in savings has assumed tariff income of £70.35 per month (16 complete £250 bands × £4.35), reducing their monthly UC by £70.35, even if the savings are in a current account earning nothing. Personal injury compensation payments are disregarded for the first 12 months. Some other payments, including certain government grants and Grenfell Tower support payments, are permanently disregarded — a welfare rights specialist can advise on your specific situation.
A worked example: family with two children
Jane and Tom have two children. Tom works part-time earning £800 per month. They pay £750 per month in rent. Their savings are £2,000. Standard allowance: £666.97. Child elements: 2 x £303.94 = £607.88. Housing element: £750.00 (assuming within LHA cap). Total maximum award: £2,046.97. Work allowance applies (children + housing): £427.00. Earnings above work allowance: £800 - £427 = £396. Taper deduction: £396 x 55% = £217.80. Monthly UC award: £2,046.97 - £217.80 = £1,829.17. No savings deduction applies as savings are under £6,000. This example illustrates a straightforward case, but real awards often have additional deductions. If Tom had an advance payment outstanding, a debt deduction or a benefit cap applying, those would reduce the payment further. The benefit cap in 2026/27 applies to households outside London receiving more than £26,500 a year (£2,208/month) in qualifying benefits — a family in this situation should check whether the cap applies, as it can reduce an otherwise high UC award. On top of the UC award, this couple would also receive Child Benefit of £44.95 a week (£2,337 a year), entirely separate from the UC calculation.