Work Allowance

Universal Credit includes a system of 'work allowances'. The work allowance is the amount a claimant can earn while still receiving the maximum Universal Credit they are entitled to; above that level, their payment is tapered away. This is essentially the same as the system of 'income thresholds' within the tax credits system.
 
In the 2015 Summer Budget, the Chancellor announced significant changes to the tax credits system to be introduced from April 2016, the most significant of which were a rise in the taper rate from 41 to 48 per cent and reductions to income thresholds. The Chancellor also announced that these changes would be followed through with the transition to Universal Credit, by making similar changes to work allowances.
 
In the November 2015 Spending Review and Autumn Statement, the changes to the tax credit thresholds and taper rate were scrapped but it was confirmed at the same time that the related changes to Universal Credit would still go ahead.
 
Work allowances are divided into higher and lower levels. Claimants who also receive the housing costs element of Universal Credit (which replaces Housing Benefit) qualify for the lower work allowance, and those who do not receive support with housing costs qualify for the higher work allowance.
 
From April 2016 work allowances are set at £4,764 for the higher rate and £2,304 for the lower rate