Assessment of earned income for employees

The rules on assessment of earned income under universal credit are set out in the Universal Credit Regulations 2013 (SI.No.376/2013).

NB: See below for equivalent legislation in Northern Ireland.

Work allowances

Regulation 22 of SI.No.376/2013

Provides the rules and rates of work allowances and for a percentage of earned income in excess of any applicable allowance to be deducted from the maximum universal credit award.

Definitions

Regulations 52 and 53 of SI.No.376/2013

Define earned income and other terms relating to earned income.

Calculation of earned income

Regulation 54 of SI.No.376/2013

Sets out how earned income in an assessment period should be calculated.

Surplus earnings

Regulation 54A of SI.No.376/2013

Provides for the carrying forward of earnings above a set threshold where those earnings have led to an award of universal credit ending.

What counts as employed earnings

Regulation 55 of SI.No.376/2013

Sets out the benefits that count as earnings (such as statutory sick pay and statutory maternity pay) and for deductions to be made from earnings for payments including tax and Class 1 national insurance contributions.

Assumed earnings where an employee is on strike

Regulation 56 of SI.No.376/2013

Sets out provisions regarding assumed earnings for an employee who is involved in a trade dispute.

Notional earnings

Regulation 60 of SI.No.376/2013

Provides for notional earnings to be taken into account where a claimant has deprived themselves of income for the purposes of securing or increasing entitlement to universal credit.

Real time information from HMRC

Regulation 61 of SI.No.376/2013

Provides for information on earnings to be provided by HMRC through real time information and sets out the circumstances in which other sources of information should be used.

In Northern Ireland, SR.No.216/2016 makes provisions that are largely equivalent to that in Great Britain.

Further explanation of the legislation is set out in guidance. Please note, however, guidance is not binding and cannot override the legislation.

Advice for decision making

Chapter H3

Provides guidance on earned income and employed earnings.

DWP guidance on gov.uk

Different earning patterns and your payments

​Provides examples of how different payment cycles can affect universal credit payments.

DWP guidance from parliament.uk

Surplus, fluctuating and irregular earnings plus payment cycles

Sets out guidance on surplus earnings (including where a claimant separates from their partner), fluctuating earnings, irregular earnings, late, missing and incorrect payments, earnings that are not paid monthly or paid on a different date than normal, and decreased earnings.

DWP guidance from parliament.uk

Self-reported earnings

Sets out guidance on self-reported earnings, earnings reported late or not received, and earnings from a suspended award.

DWP guidance from parliament.uk

Treatment of earnings

Sets out guidance on earned income, employed earnings, benefits treated as earnings, income treated as earnings, and income not treated as earnings

DWP guidance from parliament.uk

Work allowance and earnings taper rate

Sets out guidance on calculating earning, work allowances and the taper rate.

Case law​ provides further interpretation of the legislation and establishes legal precedent.

High Court

[2019] EWHC 23 (Admin)

High Court rules that DWP’s method of assessing earned income under universal credit is unlawful.

Upper Tribunal

[2017] UKUT 347 (AAC)

Secretary of State concedes that where an employer fails to notify earnings on time, a universal credit award may be adjusted to make appropriate amendments.

Upper Tribunal

[2015] UKUT 696 (AAC)

Wages received during an assessment period count as income for universal credit even if the job has ended.