Universal Credit Calculation: A Student's Guide

Universal Credit is calculated based on a variety of factors, including income, student loans, student grants, and expenses. The amount of Universal Credit a student receives depends on their circumstances, including their income and the number of children they have. Students can use a benefits calculator to estimate their Universal Credit.

Student income calculations

Step 1: Work out your total student income and disregard certain grants.

Your total student income includes any student loans and grants you receive. However, not all grants are counted as income for Universal Credit. For example, in the case mentioned above, Katie received a Special Support Grant of £3,900, which was not considered income for Universal Credit.

Step 2: Calculate your average monthly student income.

Divide your total student income by the number of months your student income will cover during the academic year. For example, if you receive a student loan of £10,800 for a nine-month academic year, your average monthly student income would be £1,200 (£10,800/9).

Step 3: Determine the number of assessment periods your student income will cover.

Universal Credit is assessed on a monthly basis, with each assessment period starting on the same date each month. Your student income may cover a full assessment period or only a portion of it, depending on your academic calendar.

Step 4: Calculate your monthly student income for Universal Credit.

Divide your total student income by the number of assessment periods it will cover. Then, subtract £110 from this amount to determine how much will be deducted from your Universal Credit calculation. For example, if your student income for the year is £9,000, and it covers seven assessment periods, your monthly student income for Universal Credit would be £1,128.57 (£9,000/7), and the deduction would be £1,018.57 (£1,128.57-£110).

Postgraduate Income Calculation:

If you are a postgraduate student, the calculation is slightly different. Universal Credit will be calculated based on 30% of the maximum postgraduate or postdoctoral loan you are entitled to. If you do not apply for the maximum loan, your Universal Credit will usually be calculated as if you received the full amount.

> Hassan gets Universal Credit and his full-time postgraduate master’s degree starts on 12 September 2024. His Universal Credit assessment periods run from 8 September 2024 to 7 May 2025. The course will last for one year, and he gets a postgraduate master’s degree loan of £10,000.

> Step 1: £10,000 - £7,000 = £3,000.

> Step 2: Hassan’s loan counts as income for seven assessment periods.

> Step 3: £3,000 ÷ 7 = £428.6.

> Hassan’s Universal Credit will be calculated based on income of £428.6 a month from 8 September 2024 to April 2025.

Due to the complexity of student income calculations for Universal Credit, it is recommended to seek advice from a professional adviser to ensure an accurate assessment of your entitlement.

Work allowance

The work allowance is the amount you can earn before your Universal Credit payment is affected. In other words, it is the amount you can keep from your earnings without it reducing your Universal Credit payment.

You can get a work allowance if you (and/or your partner who you live with) either:

• Have responsibility for a child
• Have a limited capability for work due to illness or disability

The size of your work allowance depends on whether you also get the Universal Credit housing element or Housing Benefit:

• If you get help with housing costs through Universal Credit, your Work Allowance is £404 per month.
• If you do not get help with housing costs through Universal Credit, your Work Allowance is £673 per month.

If you have earnings but you (and your partner) are not responsible for a child and do not have limited capability for work, you will not be eligible for a Work Allowance.

Your Universal Credit payment will go down by 55p for every £1 you earn above your work allowance.

Housing costs

You can get money to help pay your housing costs. The payment can cover rent and some service charges. The amount you get depends on where you live and if you’re a private or social tenant.

Private Tenants

The housing costs element for private tenants is based on the Local Housing Allowance (LHA) for where you live. LHA is calculated on a formula for rental prices in your area, for the number of rooms you need. For example, a single claimant with no children will have their LHA based on the average cost of renting a one-bedroom flat in that area. If you're under 35 with no children, your LHA will usually be based on renting a room in a shared flat or house. This means your housing costs element might not cover all your rent.

Social Housing Tenants

If you’re a social housing tenant, the housing costs element is based on your eligible rent. The eligible rent takes into consideration the number of bedrooms you need. You’re allowed one bedroom for:

• Two children of the same sex under 16
• Two children under 10, regardless of gender
• An overnight carer who doesn’t normally live with you

If you have more bedrooms than you need, your eligible rent will be reduced by:

• 14% for one spare bedroom
• 25% for two or more spare bedrooms

You won’t be affected by this reduction if you’re:

• Parents of someone in the armed forces, or a full-time student
• Parents of a severely disabled child

Homeowners

If you’re a homeowner, you might be able to get a loan to help with interest payments on your mortgage.

Childcare costs

Eligibility

To be eligible for Universal Credit childcare costs, you must be working, self-employed, or about to start work. This includes those on statutory maternity or paternity leave, or those on sick leave and receiving Statutory Sick Pay. If you live with a partner, usually, both of you must be in paid work unless your partner cannot look after your children due to a health condition, disability, or other valid reasons like being temporarily away from home. It doesn't matter how many hours you work, and there is no minimum, but it must be paid work.

What Childcare Costs Can Cover

Universal Credit can cover "reasonable" childcare costs that help you work or get into work. This includes a "settling-in period" before you start work, so your child can get used to being in childcare, as well as childcare while you travel to work and in the assessment period after you lose a job. Childcare for changing work patterns or zero-hour contracts is also considered reasonable.

The childcare must be provided by registered childcare providers, usually registered with OFSTED, the Care Inspectorate in Scotland, or the Care Inspectorate Wales. This could include nurseries, preschools, after-school clubs, breakfast clubs, childminders, nannies, and holiday clubs.

How Much You Can Get

You can get up to 85% of your childcare costs paid back to you. The maximum amount for each assessment period is £1,014.63 for one child and £1,739.37 for two or more children.

How to Claim

You will need to pay for your childcare costs yourself first, and then report them to Universal Credit to get reimbursed. You should try to arrange monthly payments with your childcare provider and report those costs as soon as they are paid to ensure your childcare costs are included in your Universal Credit every assessment period.

You can report your childcare costs in your online Universal Credit account when you first make a claim or at any point during your claim. You will need to provide proof of your childcare provider and payments. This includes a contract, invoice, or letter from the provider, as well as proof of payment, such as receipts or bank statements.

Getting Help with Upfront Costs

If you are unable to pay upfront for childcare costs, you may be able to get help from the Flexible Support Fund. This is available if you are starting work or increasing your work hours and meet certain other criteria. You can also ask your work coach about a budgeting advance, but note that this will need to be paid back.

Other Schemes

It's important to note that you cannot get tax-free childcare if you are on Universal Credit. There are other childcare costs schemes available, so it's worth checking what other help you can get to pay for childcare.

Benefit cap

The benefit cap is a limit on the total amount of benefit that can be claimed. It applies to most people aged 16 or over who have not reached state pension age. The benefit cap affects the following benefits: Bereavement Allowance, Employment and Support Allowance, Jobseeker's Allowance, Severe Disablement Allowance, and Widowed Parent's Allowance.

If you are claiming Universal Credit, the benefit cap might not start for 9 months, depending on your earnings. The benefit cap won't apply if you or your partner:

• Is working and earns at least £793 a month after tax. If you have a partner, your combined earnings need to be at least £793 a month.
• Is getting the Limited Capability for Work-Related Activity (LCWRA) element of Universal Credit.
• Is getting the carer element of Universal Credit, Carer's Allowance, or Carer Support Payment.
• Gets certain benefits because of sickness or disability or has a child who gets one of these benefits.

The benefit cap might also not apply if:

• You lost your job in the last 9 months.
• Your earnings recently went down.

The amount of money that can be claimed before the benefit cap applies depends on factors such as whether you have children in your household. For the 2024/25 period, the benefit cap limits are:

• £2,110.25 a month for couples and lone parents if you live in London.
• £1,835 a month for couples and lone parents outside London.
• £1,413.92 a month for a single person with no children in London.
• £1,229.42 a month for a single person with no children outside London.

Frequently asked questions