Universal Credit: Does a tax rebate affect Universal Credit? | Personal Finance | Finance


Many will receive a surprise in the post over the next few months as April marked the end of another tax year. Some people will find out they are due a refund on their tax, known as a tax rebate, while others will have not paid enough tax this year. Here’s how a tax rebate can affect your entitlement to Universal Credit.

What is a tax rebate?

After a tax year ends in April, HMRC may calculate that you are owed a refund.

You may have paid too much tax that year, meaning you will receive a P800 letter sometime after April explaining you are due a tax rebate.

You can then apply for your tax refund via the Government website.

READ MORE: Universal Credit UK: This is how claimants could receive more support

This income will contribute as income during your assessment period for Universal Credit, which may affect how much Universal Credit you receive for that period.

Your Universal Credit payment gradually reduces if you earn more money over a certain threshold.

For every £1 you earn, your Universal Credit allowance decreases by 63p.

So if your tax refund takes you over a certain threshold, this will impact on your Universal Credit payment for the assessment period.

How do earnings affect Universal Credit payments?

Known as the work allowance, you can earn a certain amount before your Universal Credit is reduced in certain circumstances.

This is the case if you or your partner are responsible for a child or young person, or are living with a disability or health condition which affects your ability to work.

If you get help with housing costs, your monthly work allowance is £292.

If you do not get help with housing costs, your monthly work allowance is £512.

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