Redundancy and Universal Credit

Do you need to claim Universal Credit?

If you have been made redundant, you should claim Universal Credit as soon as possible — do not wait until your savings run out. The application takes time to process, and your claim will only start from the date you submit it, not from the date you lost your job.

To claim Universal Credit, you must:

• Be under State Pension age (or in a joint claim where one partner has not yet reached State Pension age)
• Be on a low income or out of work
• Have capital and savings below £16,000 (though this affects how much you receive, not whether you can claim)
• Be available for work — unless you have a health condition or disability that limits this

How redundancy pay affects your Universal Credit

Statutory redundancy pay is treated as capital in Universal Credit calculations, not as income. This is an important distinction:

• Capital under £6,000: not counted at all — it has no effect on your Universal Credit payment
• Capital between £6,000 and £16,000: each £250 (or part thereof) is treated as £1 per month of "income" — reducing your Universal Credit by a small amount
• Capital over £16,000: you are generally not eligible for Universal Credit

This means small statutory redundancy payments (say £5,000) have no effect on your Universal Credit at all. Larger payments can affect it, but the taper is relatively gentle.

The taper and how it works

Universal Credit uses a taper system rather than a simple deduction. When you have capital over £6,000:

• For every £250 (or part thereof) above £6,000, your Universal Credit is reduced by £1 per month
• So if you have £10,000 in savings, you have £4,000 above the £6,000 threshold — that is 16 units of £250, reducing your Universal Credit by £16/month
• If you have £16,000 exactly, you are at the upper limit — your Universal Credit is reduced by £40/month (£10,000 / £250 = 40 units × £1 = £40/month)

This is why most people with moderate redundancy pay (£10,000–£20,000) see only a small reduction in their Universal Credit — not the full amount being taken away.

Timing — when to claim

You should make your Universal Credit claim as soon as you know you are being made redundant — do not wait for your last day. The claim date is the date that matters for starting your award.

If you delay and your savings fall below the threshold while waiting, you may be treated as having reduced your capital deliberately to qualify — which can affect your claim.

You can also claim Jobseeker's Allowance (JSA) as an alternative while your Universal Credit claim is being processed, or if you prefer the structure of JSA. You cannot receive both JSA and Universal Credit at the same time.

Notification requirements

When you receive your statutory redundancy pay, you must notify the Department for Work and Pensions (DWP) — which runs Universal Credit — about the payment. This is because the payment affects your capital and therefore your Universal Credit award.

You should report the payment through your Universal Credit journal as soon as you know the amount and the date you will receive it. Failure to report can be treated as fraud.

What else affects your Universal Credit while job hunting

While you are on Universal Credit and job hunting, be aware of what else can affect your payment:

• Earnings from part-time work — reduce your Universal Credit at a rate of 55p per £1 earned (the taper)
• Other income — savings interest, rental income, self-employment income all affect the calculation
• Availability for work — you must be actively seeking work and willing to take suitable employment
• Health conditions — if you have a health condition limiting your work capacity, you may be placed in a different group with different requirements