Pay rises and benefits
Getting a pay rise is generally a good thing. Some benefits will not change, but others will stop or reduce if you earn more or work more hours.
If you’re claiming benefits like Employment and Support Allowance (ESA) or Working Tax Credit, a pay rise could mean that you move on to Universal Credit.
Benefits that cover the extra costs of being disabled, like Personal Independence Payment (PIP), are not linked to your income.
Calculate out how much you can claim after a pay rise.
When your income or other circumstances change
If you’re claiming benefits:
Claiming ‘old’ benefits like ESA and tax credits
If your pay rise affects the benefits that you claim, you have to claim Universal Credit. Once you start claiming this, you cannot re-claim ‘old’ benefits like ESA.
For example, if you claim ESA and your pay rise means that you earn more than £131.50 a week after tax and National Insurance, you must claim Universal Credit.
When you claim Universal Credit:
- your old means-tested benefits stop
- you will not get a payment for at least 5 weeks, but you can get an advance payment to cover you. You need to repay this over 12 months.
Benefits for people who are sick or disabled (not means-tested)
Personal Independence Payment (PIP) and Disability Living Allowance (DLA) cover the extra cost of being disabled. They are not affected by your income, and you can claim them even when you earn more.
If your increase in income (for example, if you were working more hours) suggests that you can do things that you could not when you were assessed for PIP, this might lead to a re-assessment. This could reduce or stop your PIP payments.
The other non-means-tested benefits for sick and disabled people are:
- Attendance Allowance (only if you are retired)
- Armed Forces Independence Payments (instead of PIP)
- Industrial Injuries Disablement Benefit
- Constant Attendance Allowance (if you became disabled after getting injured at work or fighting in the armed forces)
You should be better off by 37p for every pound you earn above your ‘work allowance’. Your work allowance is how much you can earn before your Universal Credit is reduced.
When you’re in work, DWP ‘know’ about your earnings. DWP will adjust your Universal Credit if you earn more.
- pay rise means that you no longer qualify for Universal Credit, you do not need to sign off
- earnings reduce within 6 months, your claim will still be live and you’ll start receiving Universal Credit again
For example, if you were claiming Universal Credit, but earned more in December so you did not qualify for Universal Credit that month, you would start receiving it again if you earn less in January.
Last reviewed by Scope on: 22/04/2018