The Universal Credit assessment period and earned income

This Commons Library briefing looks at the problems working Universal Credit claimants can experience because of the assessment period rules, and at the implications of a recent High Court judgment.

Universal Credit is assessed and paid monthly.  For claimants who are in work, the amount they receive is based on their earnings with reference to a fixed monthly period – the “assessment period.”

For some people – for example, those who are not paid wages monthly, or whose wages are paid on the last working day of the month – this can mean that in some assessment periods they receive an additional payment of wages.  As a result, Universal Credit awards can fluctuate unpredictably.  Claimants may also lose out as only one monthly “work allowance” can be deducted from their earnings when their UC award is calculated.

The Department for Work and Pensions advises Universal Credit claimants to be prepared for months when they will get an additional payment of wages and budget accordingly or, alternatively, ask their employer to change the date on which they are paid.

On 11 January 2019, the High Court ruled that the DWP had wrongly interpreted the regulations on how earned income should be calculated.  It held that the amount of earned income in respect of an assessment period is based on, but not necessarily the same as, income actually received in that period.  The DWP would have to make adjustments where the actual amounts received in an assessment period do not in fact reflect earnings payable in respect of that period.

While the High Court rejected the DWP’s application for permission to appeal the decision, the Department has now received permission to appeal from the Court of Appeal and a hearing has been scheduled for 19 May 2020.  In the meantime, the DWP has said that it is relying on powers in social security law which allow it to continue to apply the law as it stood before the High Court gave its ruling on 11 January, until the case is finally concluded.