What tariff income is
Tariff income is the assumed monthly income that DWP attributes to your savings when they fall between £6,000 and £16,000. It is not money you actually receive. It is a number DWP uses to reduce your UC award.
The rate is fixed: £4.35 per £250 (or part of £250) above the £6,000 lower disregard. This rate has not changed since Universal Credit launched.
Tariff income is added to any actual unearned income you have, and the total then reduces your UC award through the standard calculation.
How the calculation works
Step one: take your total capital and subtract £6,000. Step two: divide by £250 and round up to the next whole number (a part band counts as a full band). Step three: multiply by £4.35.
Example: savings of £9,500. Excess: £9,500 minus £6,000 = £3,500. Complete £250 bands: £3,500 divided by £250 = 14 complete bands. Tariff income: 14 x £4.35 = £60.90 per month.
Your UC award is then reduced by £60.90 per month. If the tariff income pushes your calculated UC to zero or below, the award becomes nil.
Full tariff income table: £6,000 to £16,000
£6,000 or less: £0. £6,000.01 to £6,250: £4.35 (a part band counts as a full band). £6,500: £8.70. £6,750: £13.05. £7,000: £17.40. £7,500: £26.10. £8,000: £34.80. £8,500: £43.50. £9,000: £52.20. £9,500: £60.90. £10,000: £69.60. £10,500: £78.30. £11,000: £87.00. £11,500: £95.70. £12,000: £104.40. £12,500: £113.10. £13,000: £121.80. £13,500: £130.50. £14,000: £139.20. £14,500: £147.90. £15,000: £156.60. £15,500: £165.30. £15,750: £169.65. £16,000: UC stops.
The £16,000 cliff edge: why it matters
At £16,000 of savings you still receive reduced UC. One pound more and you receive nothing. There is no gradual taper above £16,000. The award ends completely.
This creates a sharp cliff edge. A household with £16,000 might receive £200/month in UC. A household with £16,001 receives nil. The difference of £1 in savings costs them £200/month in UC.
If your savings are close to £16,000, it is worth understanding this precisely. Fluctuations in savings, particularly for self-employed claimants whose monthly income varies, can push households in and out of entitlement.
Tariff income and Pension Credit: a different rate
Pension Credit uses a different formula. The lower disregard is £10,000 (not £6,000). The rate above £10,000 is £1 per week for every £500 or part of £500 (not £4.35 per month per £250). There is no upper capital limit for Pension Credit.
This means a pensioner with £20,000 in savings has £10,000 of capital above the disregard, generating £20 per week of assumed income that reduces Pension Credit. They still receive some Pension Credit.
UC's tariff income rate of £4.35 per £250 per month is broadly equivalent to an annual return of around 20% on capital. It is significantly higher than actual savings interest rates, which is why the reduction can feel disproportionate.