Guidance

Universal Credit: debt and deductions that can be taken from payments

Help to understand debts and deductions taken from Universal Credit payments and who to contact about your debts and deductions if you're struggling financially.

Who can claimants talk to about debts/deductions?

Who to contact depends on what type of query claimants have. The grid below outlines who they should contact in each specific circumstance.

Deduction type and who to contact (contact details below table)

Type of query Third Party Deductions (e.g. Fines/Gas /Electric/Water) Universal Credit Overpayment Benefit Overpayment / Social Fund/ tax credits Universal Credit Advance Recoverable Hardship Payment
Explanation needed / Dispute or Appeal Third Party supplier/creditor or Universal Credit Universal Credit Debt Management Universal Credit Universal Credit
How much do I owe? (what’s my outstanding balance?) Universal Credit/Third Party supplier/creditor (if claimant has also made direct payments to creditor) Debt Management Debt Management Universal Credit Universal Credit
What are the deductions for? Universal Credit Universal Credit Debt Management Universal Credit Universal Credit
Financial Hardship decision Not applicable Debt Management Debt Management Universal Credit Not applicable
I want to make a payment Third Party provider/creditor Debt Management Debt Management Debt Management Debt Management

Debt Management is part of the DWP that specialises in the management and recovery of debt. This includes benefit overpayments and Social Fund loans.

If claimants are struggling with recovery of benefit debt (overpayments/Social Fund) they can contact DWP Debt Management on:

DWP Debt Management

Telephone: 0800 916 0647
Textphone: 0800 916 0651
NGT text relay – if you cannot hear or speak on the phone: 18001 then 0800 916 0647
Calling from abroad: +44 (0)161 904 1233
Monday to Friday, 8am to 7.30pm
Saturday, 9am to 4pm

Find out about call charges

Universal Credit helpline

Telephone: 0800 328 5644
Welsh language: 0800 328 1744
Textphone: 0800 328 1344
NGT text relay – if you cannot hear or speak on the phone: 18001 then 0800 328 5644
Monday to Friday, 8am to 6pm

Find out about call charges

Third party providers/utility companies

Find contact details of third party providers/utility companies on recent bills or on their website.

Claimants who live in Northern Ireland and need to discuss their debts, contact the Department for Communities Debt Management service.

What is a Conditionality Sanction or Fraud Penalty?

A Conditionality Sanction is where a claimant doesn’t meet their responsibilities that they’ve agreed to in their Claimant Commitment. There are different levels of sanctions and they’re decided based on what the claimant did and how often.

A Fraud Penalty is where a claimant has committed a benefit fraud and as a deterrent against abuse of the benefit system the DWP has applied a ‘loss of benefit’ penalty.

The Conditionality Sanction or Fraud Penalty reduces the amount of Universal Credit standard allowance: the amount of Universal Credit that does not include extra money for things like children and housing costs) being paid by up to 100% for a single claimant or up to 50% for each member of a couple (a lesser % is applied to those not in the full work conditionality regime).

If either a Fraud Penalty or Conditionality Sanction is being taken then no other deductions will be made, except for Last Resort Deductions.

What are Last Resort Deductions?

Last Resort Deductions are for arrears of owner-occupier service charges or rent, and/or arrears of fuel (gas and/or electricity).

Last Resort Deductions are taken in order to help prevent claimants being evicted from their home and having their fuel disconnected.

What is a Third Party deduction?

Some claimants have difficulty managing their money. They may struggle to pay their household bills and can get into arrears.

In certain circumstances, DWP can deduct money, on their behalf, from their Universal Credit and pay it direct to the person or organisation that they owe, such as their landlord or utility supplier (this is the company they get their gas, electricity or water from) to clear any arrears.

Third Party deductions can be taken without the claimant’s consent and can be for things like:

  • housing costs e.g. rent (for the claimant’s current address)
  • fuel costs e.g. gas and electricity (for the claimant’s current supplier)
  • Council Tax
  • unpaid fines or compensation orders
  • water and sewerage charges (for the claimant’s current supplier)
  • Child Maintenance

Only 3 Third Party Deductions can be taken at any one time.

Whilst deductions for arrears of utilities are being made, deductions for the ongoing cost of those utilities (gas, electricity or water) can also be made and paid direct to the supplier, if it is in the best interest of the claimant and their family.

The claimant will be notified via their Universal Credit journal when a Third Party Deduction starts.

A Third Party Deduction amount is a fixed percentage that cannot be changed. There is one exception: rent arrears taken at a rate above 10% which can be temporarily reduced where a person is experiencing unexpected financial difficulties. Claimants can speak to their work coach for further information.

What is benefit debt?

Benefit debt includes Social Fund loans, recoverable Hardship payments, Advances, Department for Work and Pensions (DWP) administrative and civil penalties, tax credits, Housing Benefit and DWP fraud and normal overpayments.

More information on benefit overpayments.

What is a Universal Credit Advance?

Advances can be for:

  • new Universal Credit claims and/or where the claimant transfers from another benefit to Universal Credit. The most a claimant can get as an advance is the amount of their first estimated Universal Credit payment. The advance is repayable over 12 assessment periods and can be delayed for up to 3 months if the claimant experiences an unexpected financial crisis.

  • change of circumstances (up to 50% of the estimated increase in the Universal Credit payment). The advance is repayable over 6 assessment periods and can be delayed for up to three months.

  • Budgeting Advance, which is for help with any unforeseen expenses (e.g. essential household items) or expenses related to maternity, getting or keeping a job. The advance is repayable over 12 assessment periods, which can be extended by up to a further 6 assessment periods. Only one Budgeting Advance is available at a time.

The rate of repayment of advances is up to a maximum of 30% of the claimant’s standard allowance.

The repayment stops where the claimant has a Fraud Penalty or Conditionality Sanction and starts again when these end; or where not all of the 30% is being deducted (at the end of the Fraud Payment or Conditionality Sanction repayment period), in which case the remaining balance of the 30% can be applied for the repayment of an Advance or any other deductions.

Recoverable Hardship Payments

Claimants may be able to get a Hardship payment if their Universal Credit payment is being paid at a reduced rate because of a Sanction or Fraud Penalty and they are unable to meet basic essential needs for themselves and their family.

Important: Universal Credit Hardship Payments are recoverable but only when there are no outstanding deductions for a Fraud Penalty or a Sanction. Once a Recoverable Hardship Payment repayment has been applied this amount is non-negotiable.

However, the repayments can be suspended for any assessment period where the claimant has earnings at least equal to the Conditionality Earnings Threshold. If they are part of a joint claim, this will be if the claimant and/or their partner have earnings at least equal to the combined couple’s Conditionality Earnings Threshold.

The balance can be written-off once claimants sustain this level of earnings for a period (or periods totalling) at least 6 assessment periods since the last Sanction or Fraud Penalty reduction applied to their Universal Credit award.

Moving from tax credits to Universal Credit

If a tax credits claimant makes a new claim for Universal Credit their tax credits award will be stopped.

The claimant’s move to Universal Credit could create a tax credits overpayment which they will have to pay back as well as any other tax credits overpayments they may have. DWP will recover any overpaid tax credits when the claimant moves to Universal Credit.

Claimants that move to Universal Credit will get a letter from HMRC called ‘Your tax credits overpayments’ - TC1131.

This will tell the claimant about any tax credits debt that will be transferred and recovered by DWP from their Universal Credit award.

Different debts may be transferred at different times and therefore claimants may receive more than one letter.

If they claimed tax credits as a couple, their debt will be split equally.

If claimants wish to discuss how their share has been calculated, they will need to contact HMRC (details are on the TC1131 letter).

How much can be taken from Universal Credit payments?

There is an overall maximum percentage rate for all debts and deductions that can be taken from a Universal Credit payment. The maximum amount that can be deducted is an amount equivalent to 30% of the claimant’s Universal Credit standard allowance.

There are 2 exceptions to this rule, Last Resort Deductions (arrears of housing and fuel) and ongoing monthly costs for utilities (gas, electricity and water) where there are also arrears being taken for them.

Overpayments are repaid at a rate of up to 15% of the standard allowance. If one or both of the claimants’ (if they are a couple) earnings are above the level of the work allowance (if the work allowance is applicable) an additional amount of up to 10% more can be deducted.

If a claimant has intentionally provided DWP with incorrect information (fraud) overpayments are repaid by deducting up to 30% of the Universal Credit standard allowance.

If the Universal Credit claim is a joint claim (a couple claiming together) they will receive a single monthly Universal Credit payment for the household. If either one of the claimants has debts or deductions, they will be taken from the single monthly payment.

What order will debts be dealt with/paid off?

There is a priority order for deductions in Universal Credit. It will only be applied if the total deductions would otherwise be more than 30% of the claimant’s Universal Credit Standard Allowance.

However, the following deductions are taken before the priority order is applied (in order of precedence):

  1. Fraud penalties
  2. Sanctions
  3. Short term Advance (Universal Credit Advance - taken out at the time of a new claim or a change of circumstances)
  4. First Month Advance (Universal Credit Advance – taken out at the time of transfer from another benefit)
  5. Budgeting Advance

Only 1 sanction or 1 fraud penalty can be paid back by a claimant at any one time. However, both members of a couple can have a sanction/fraud penalty applied at the same time.

If a sanction is in place, and a fraud penalty needs to be applied to the claimant’s Universal Credit, the fraud penalty will take priority. The sanction will be applied once the fraud penalty has been paid off.

If a fraud penalty or sanction is being applied, an Advance cannot be recovered at the same time. This is because the fraud penalty/sanction will take priority. The Advance will be recovered once the fraud penalty/sanction has been paid off.

If a claimant has more than one Advance outstanding, the priority order (above) for Advances will be applied.

A full list of deductions and their priority order can be found at Annex A

Note that the Universal Credit systems are able to stop one deduction and start another during the claim if the new debt is higher up the priority order than other deduction(s) being taken.

How much Universal Credit will be paid?

It is not possible to say before of the end of an Assessment Period how much will be deducted because of the way Universal Credit is calculated. Once the calculation is made, at the end of the Assessment Period, the claimant’s Universal Credit statement will give a breakdown of each deduction.

If the claimant has a query about their deductions, they should contact Universal Credit through their journal.

Note: when totalling all the potential deductions for Advances, Third Party Deductions and Benefit debt - if these exceed 30% of the claimant’s standard allowance, then they are capped at 30% (except for Last Resort Deductions).

If a claimant is in financial hardship

If a claimant is experiencing financial hardship they can ask for a financial hardship decision to reduce the amount of Benefit debt they are currently repaying.

A financial hardship decision can be considered by DWP if the claimant has deductions being taken from their Universal Credit for a tax credits debt, benefit debt, Social Fund loan or rent arrears (if the rent arrears are being taken at a rate greater than 10% of the standard allowance).

If DWP makes a decision to reduce the claimant’s deductions, the new reduced deduction rate will be applied automatically to their next Universal Credit Assessment Period.

What happens to debts if the claimant stops getting Universal Credit?

If Universal Credit is no longer in payment, DWP will pursue other recovery methods, for example, by deduction from other benefits or voluntary payments. Where this is not possible then DWP will pursue the recovery by deductions from pay, known as a Direct Earnings Attachment or debt collection agencies.

Advice on money and debt

If claimants are struggling financially or need financial help and advice, they can contact:

Annex A - Deductions priority order

The following deductions are taken before the priority order is applied (in order of precedence):

  1. Fraud penalties
  2. Conditionality sanctions
  3. Short term Advance (Universal Credit Advance - taken out at the time of a new claim or a change of circumstances)
  4. First Month Advance (Universal Credit Advance – taken out at the time of transfer from another benefit)
  5. Budgeting Advance Any remaining deductions are taken in the following order of precedence:
  6. Owner-occupier service charges arrears (where the lender is not part of Mortgage Interest Direct (MID) scheme)
  7. Rent and/or service charges arrears (at 10% of the standard allowance).
  8. Fuel arrears: (gas and/or electricity arrears can come above gas arrears, if only one can be taken)
  9. Council Tax or Community Charge arrears
  10. Fines or Compensation Orders (at 5% of the standard allowance)
  11. Water charges arrears
  12. Child Maintenance
  13. Social Fund loans
  14. Recoverable Hardship Payments
  15. Housing Benefit and DWP Administrative Penalties
  16. Housing Benefit, Tax Credit and DWP Fraud overpayments
  17. Housing Benefit and DWP Civil Penalties
  18. Housing Benefit, Tax Credit and DWP normal overpayments
  19. Integration Loan arrears
  20. Eligible Loan arrears
  21. Rent and / or service charges arrears (maximum deduction rate of up to 20% of the standard allowance)
  22. Fines or Compensation Orders (maximum deduction rate) Universal Credit systems will be able to stop one deduction and start another deduction during the claim if the new debt is higher up the priority order than the recovery being deducted
Published 6 August 2019
Last updated 16 October 2019 + show all updates
  1. Changed the maximum amount of repayment of a Universal Credit advance from 40% to 30% of the claimant's Universal Credit standard allowance.
  2. Added translation
  3. Amended contact details for a Financial Hardship decision about Third Party Deductions (e.g. Fines/Gas /Electric/Water).
  4. Added translation
  5. First published.