# How Universal Credit is worked out: allowances, earnings and savings > Universal Credit is built from a standard allowance plus extra amounts, then reduced by earnings and savings. This guide explains each step using the… - URL: https://centiview.com/uk-money/universal-credit-how-payment-is-worked-out - Published: 2026-10-19T13:36:00.000Z - Figures checked: 2026-10-19 - Edited by David A - Topic: Benefits & Support (UK) - Publisher: Centiview (Persie Ltd, London) - General information only, not financial advice Universal Credit is built from a standard allowance plus extra amounts, then reduced by earnings and savings. This guide explains each step using the 2026/27 figures, with a worked example, and who it does and does not cover. ## How the payment is built up Universal Credit is a monthly payment to help with living costs for people on a low income, out of work, or unable to work. It replaces several older benefits, including Housing Benefit and income-related Employment and Support Allowance, although some people are still on those. The amount is not a single flat sum. It starts with a standard allowance that depends on whether you are single or in a couple and on your age, and then extra amounts, known as elements, are added for particular circumstances. Examples are children, a health condition or disability, caring for someone, childcare costs and help with rent. The total of everything you qualify for is called the maximum amount, and it is the figure that earnings and savings are later taken away from. The standard allowance for the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, is set per month. A single person under 25 receives £338.58 and a single person aged 25 or over receives £424.90. For a couple, the figure is £528.34 when both are under 25 and £666.97 when at least one partner is 25 or over. The child element is £303.94 per child, with a higher £351.88 for a first child born before 6 April 2017. There are also additions for disabled children, at £164.79 for the lower rate and £514.71 for the higher rate, and a carer element of £209.34. These amounts were read on GOV.UK and in the Department for Work and Pensions rates publication on 19 October 2026. ## How earnings reduce the payment Work does not switch Universal Credit off at a fixed point. Instead, the payment tapers, which means it falls gradually as earnings rise. For every £1 of net earnings above your work allowance, your payment goes down by 55p. Net earnings means pay after income tax and National Insurance. The work allowance is the amount you can earn before the reduction begins. It applies only if you or your partner are responsible for a child or young person, or have a health condition or disability that limits your ability to work. Anyone without either of those has no work allowance, so the reduction starts from the first pound of earnings. The work allowance comes in two sizes. If your award includes help with housing costs, or you are in temporary council accommodation because of homelessness, it is £427 a month. If it does not include a housing amount, it is £710 a month. The 55% rate has applied since the Budget of 27 October 2021, when it was reduced from 63%. Because tax and National Insurance also come off pay, and some people lose other help as income rises, the overall gain from extra earnings can be smaller than the taper figure alone suggests. ## How savings affect it Savings and investments are counted as capital. Up to £6,000 is ignored. Between £6,000 and £16,000, your payment is reduced by £4.35 a month for every complete £250 above £6,000, with another £4.35 deducted for any leftover amount that is less than £250. At £16,000 or more, you cannot get Universal Credit at all. For example, if someone had £7,100 in savings, that is £1,100 above £6,000. That is four complete blocks of £250 (£1,000) plus £100 left over, so five deductions of £4.35, or £21.75 a month. Just under the £16,000 limit the reduction reaches its maximum of £174.00 a month, which is 40 deductions of £4.35. ## A worked example The figures here are illustrative only and are not a forecast of any real claim. Suppose a single parent aged 30 has one child born in 2019 and rents a home, and their award includes a housing amount of £500 a month. The maximum amount is £424.90 + £303.94 + £500.00 = £1,228.84. If their net earnings are £1,000 a month, the work allowance for someone with housing help is £427, so £573 is taper-able (£1,000 - £427). The reduction is 55% of £573, which is £315.15, leaving £1,228.84 - £315.15 = £913.69 a month. For comparison, take the same earnings and no housing element. The maximum is £424.90 + £303.94 = £728.84. The work allowance is £710, so £290 is taper-able. The reduction is 55% of £290, which is £159.50, leaving £569.34. ## Who this applies to, and who it does not The rules above apply to Universal Credit claims in England, Scotland and Wales. Some people in Scotland are paid twice a month rather than monthly. Northern Ireland runs Universal Credit through its own arrangements, and nidirect is the place to check local detail. These figures do not cover people who get Pension Credit instead, and they do not set out every element, such as the rules for the health-related amounts, which changed for new claims from 6 April 2026. The benefit cap, which limits the total of certain benefits, can also reduce a payment and is not covered in this guide. ## Common mistakes and where to get free help Common difficulties include not reporting changes in earnings or savings, assuming a payment will stay the same each month when pay dates fall unevenly across the assessment period, and not knowing that a work allowance exists. It can be worth checking the figures on your online account against your payslips, and asking for a review if something looks wrong. Free, independent help is available from Citizens Advice, and MoneyHelper can talk through budgeting. Entitlement is personal, so an adviser can look at your own circumstances in a way a general guide cannot. > **Key numbers** 2026/27 monthly figures. Standard allowance: £424.90 single 25+, £666.97 couple (one or both 25+). Child element £303.94. Taper 55p per £1 of net earnings above the work allowance (£427 with housing help, £710 without). Savings: ignored to £6,000, £4.35 per £250 up to £16,000. > **Who this affects** People on or considering a Universal Credit claim in Great Britain, especially working families and those with savings. Not a substitute for advice on your own claim. ## Check before you act Rates, rules and eligibility can change, and every figure here was read on 19 October 2026. Please confirm the current amounts on the official pages linked below, or with a free adviser, before relying on them. ### Sources - [GOV.UK, Universal Credit: what you'll get](https://www.gov.uk/universal-credit/what-youll-get) - [GOV.UK, Universal Credit: how your wages affect your payments](https://www.gov.uk/universal-credit/how-your-wages-affect-your-payments) - [DWP, Benefit and pension rates 2026 to 2027 (PDF)](https://assets.publishing.service.gov.uk/media/69931706ceeaa48d377f6bd5/Benefit-and-pension-rates-2026-2027.pdf) - [GOV.UK, Universal Credit: how it's paid](https://www.gov.uk/universal-credit/how-its-paid) - [Shelter, understand what a UC claimant is entitled to](https://england.shelter.org.uk/professional_resources/practical_resources/tools_and_guides/how_to_check_universal_credit_payments_for_a_client/understand_what_a_uc_claimant_is_entitled_to) - [Citizens Advice, taper rate announcement (27 October 2021)](https://www.citizensadvice.org.uk/about-us/media-centre/press-releases/taper-rate-announcement-means-workers-can-keep-more-of-their-hard-earned-cash/)