Taper rate

As people have an increase in earnings, their benefit is reduced. The rate at which the benefit is reduced as their earnings increase is called the taper rate. For example, a taper rate of 80% would mean losing 80p of benefit for every £1 earned. In the system in place before the Act came into force there were several different taper rates, some applied to gross earnings and some to net earnings, making it difficult for a claimant to know what effect an increase in income would have.

UC has one taper rate for earnings set at 65%. So, once any disregarded earnings have been taken into account, Universal Credit is withdrawn at a rate of 65p for each £1 of net earnings. In other words, claimants will be £35 better off for every £100 they earn. The government claims that this makes it affordable, but still offers people an incentive to work. Statutory payments, such as Statutory Sick Pay, are treated in the same way as income from earnings.

Most income from other sources which a person could use to meet their living costs, for example early retirement pension income or maintenance payments, is taken into account in full, so that Universal Credit is reduced pound for pound.