Universal Credit is made up of a standard allowance plus any additional amounts that apply, for example for housing or a child. The overall maximum amount that can be deducted for debt repayments from a claimant’s Universal Credit each month is an amount equal to 40 per cent of their Universal Credit standard allowance.
Where requested deductions exceed the 40 per cent maximum, or there is insufficient Universal Credit in payment for all deductions to be made, a priority order is applied, which determines the order in which items should be deducted. ‘Last resort’ deductions, such as rent or fuel costs, are towards the top of the priority order, ensuring that claimant welfare is prioritised, followed by social obligation deductions, such as fines and child maintenance, and finally benefit debt, such as Social Fund loans and benefit overpayments.
There are two exceptions to the overall maximum deduction rate. The first is deductions for current consumption of gas, electricity and water, which do not count towards the overall maximum amount. The second is where a Fraud Penalty or Conditionality Sanction is being applied or an Advance needs recovering. A penalty or sanction takes precedence and an Advance will be recovered once the penalty or sanction has ceased. This is unless the penalty or sanction results in less than the maximum 40% deduction being taken, in which case other deductions (e.g. the Advance) can be taken up to the 40% maximum. ‘Last resort deductions’ (arrears of mortgage interest, rent, service charges, gas or electricity) continue to be taken, even if it means that more than 40 per cent is deducted. This is to protect vulnerable claimants from being made homeless or having their fuel disconnected.