UC Earning Taper Rate 55p Per £

Dave1UK

So I work full time, however my wife has been out of work. We therefore have a joint UC claim as a top-up.

I am going over our payments and my wages etc, as I have the ability to do overtime at work and have done previously however the extra earned is just so ridiculously low that it's not worth doing. Maybe I am miscalculating something? The calculation doesn't seem to actually be 55p per £?

I have previous month examples for 1, 2, 3 and 4 days of overtime so can see the differences in net from them after deductions etc. I get paid monthly.

For example:

Our normal full UC award at my normal wage (full-time 40 hours weekly no overtime) is £841.65. Earnings reported by employer is £2,146.21 (£2,106.21 net) making a combined net of £2,947.86.

With 1 day overtime (full-time + 8 hours so 48 hours weekly) UC award is £727.07. Earnings reported by employer is £2,354.34 (£2,182.02 net) making a combined net of £2,909.09. So overall that's -£38.77 for 8 hours of work? I am worse off by £38.77 for working!

With 4 days overtime (full-time + 32 hours so 80 hours weekly) UC award is £561.68. Earnings reported by employer is £2,655.05 (£2,428.01 net) making a combined net of £2,989.69. So overall that's £41.83 for 8 hours of work i.e. £1.31 per hour.

Am I missing something?

peteuk

Your UC statement will show you the deductions, it might be worth screenshotting the relevant pages and use them to highlight your point.

Taking out any personal details ect.

LightFlare

point 1 doesn’t look as if it makes sense or shouldn’t

Point 2 - that’s how it’s meant to be. You are still gaining money and now have less obligations to meet (if any) to receive UC

Point 2 highlights the “trap/mindset” that the system can create

NedS

@Dave1UK You are not missing anything, in simple terms, once you've used up any work allowances, if your take home pay is £100 higher in an assessment period due to overtime worked, your UC will be reduced by £55. Overall you will be better £45 off per extra £100 of net take home pay.

Your 'net' take home pay for UC purposes is your gross pay minus any deductions for tax, NI and pension contributions. Any other deductions from your pay are not generally taken into account.

The discrepancy in your calculations come from the difference between the earnings reported by your employer and your net figures. If you use the earnings reported by your employer (taken from your UC statement?), then the calculations are almost correct (out by a few pence so maybe a small typo in one of your figures?). For example:

In a base month, your earnings reported by employer are £2,146.21 and your UC is £841.65

In a month where your earnings reported by employer was £2,354.34, you have earned £208.13 more which will reduce your UC by £208.13 x 0.55 = £114.75 which gives a UC award of £726.90 which approximately matches what you said.

In a month where your earnings reported by employer was £2,655.05, you have earned £508.84 more which will reduce your UC by £508.84 x 0.55 = £279.85 which gives a UC award of £561.79 which again approximately matches what you said.

So the question is what is causing the difference between what your employer is reporting as your earnings to UC and your 'net' take home pay that you've given. Presumably there are some other deductions being taken from your pay that are not tax, NI or pension contributions that are not deemed deductible by UC. Or maybe your employer is not reporting your earnings correctly to HMRC/DWP and there is a discrepancy between what they have reported and what is on your payslip?

Dave1UK

https://forums.moneysavingexpert.com/discussion/comment/81976695#Comment_81976695

Will do so now, I've cross checked UC, my payslips and GOV.UK tax info to ensure everything matches up and it does, except ofc either my calc for the UC deduction isn't correct or on their side it isn't?

https://forums.moneysavingexpert.com/discussion/comment/81976735#Comment_81976735

What part doesn't make sense?

https://forums.moneysavingexpert.com/discussion/comment/81976773#Comment_81976773

Everything seems to be inline i.e. my payslips match what is being reported to HMRC/DWP as I double checked this.

I have uploaded my UC payments and my payslips here, link is valid for 24 hours due to the hosting I found online for free, can reupload if needed again: https://jumpshare.com/s/NN4aJDqUhW1n8BC53K8t

kaMelo

Student loan repayments are not deductable so you need to add that back which, for UC purposes, gives you a take home pay of £2,241.02, although that still doesn't tally with the reported income UC have used, £2,354.34,

The correct deduction should be (£2,241.02 - £427) x 0.55 = £997.71, giving you about £70 more.

chrisbur

Not really my line but it appears to me that only tax and NI are being deducted and no deduction for pension.

Yamor

Yes, it would seem that your employer is reporting the pension deduction incorrectly.

They seem to be using a 'relief at source' scheme, which means that the payslip is actually correct, but they are not reporting the pension deduction as being a pension deduction from net pay, but as some other deduction from net pay. This is causing UC not to allow the pension deduction.

You should raise an RTI dispute with UC for as far back as they allow, and also approach the payroll dept at your employer, and ask them to report the pension deduction correctly.

(To clarify, you are not asking them to put the pension deduction as a deduction from gross pay for tax, but to make sure that it is reported as a pension deduction from net pay, and not some other deduction from net pay.)

However, all the above does not massively impact on your original question (although it does make it appear slightly worse).

You haven't provided the paperwork for your base case without any overtime (and looking at the figures you gave for that month in your original post, there would seem to be something else going on in your payslip that month). But, looking at the four cases you have provided, they are correct (besides for the pension issue):

Each extra day of overtime gives you £139 extra gross pay. You lose 20% tax, 8% NICs, 9% student loan, and 4% pension from that. That all comes to 41%, and means you are left with 59% of the extra gross pay.

UC then deduct 55% of your gross pay less tax and NICs, so 55% of 72% of the gross pay, which equals 39.6% of the full gross pay.

That means you are overall better off by 59% - 39.6% = 19.4% of the gross pay.

So, on extra gross pay of £139, you end up better off by about £27.

Once the pension issue is corrected, that figure will change to 21.6% of the gross pay. For extra gross pay of £139, that would come to about £30.

Dave1UK

https://forums.moneysavingexpert.com/discussion/comment/81977396#Comment_81977396

So if I understand correctly in terms of "net" I'd benefit £30 on top after all deductions even when my pension is correctly reported by my employer?

Also in terms of my pension being reported, would this be shown on my GOV personal tax account? I.e. currently I can check my reportings but they just show gross pay + income tax and NI deductions nothing about pension contributions. Would it normally be displayed there as well or elsewhere?

Yamor

https://forums.moneysavingexpert.com/discussion/comment/81978535#Comment_81978535

I'm not aware of the pension being shown anywhere, besides for possibly if you have, and access, your online account with the pension provider which your employer uses.

But, in any event, that likely wouldn't tell you whether the pension deduction was being reported correctly.

I can tell you which RTI data field they are likely including it in at the moment, and which one they should be including it in, but they will be using software, and probably won't understand the underlying RTI fields.

They are probably already including it in field 58B - "Value of deductions from net pay in pay period", which is actually correct.

However, they should ALSO be including it in field 65 - "Value of employee pension contributions that are not paid under a net pay arrangement".

Yamor

And yes, you would benefit by approx. £30:

£139 extra gross pay

Deductions:

Tax: 20%

NICs: 8%

Student loan: 9%

Pension: 4%

UC: 55% × (100% - 20% - 8% - 4%) = 37.4%

Deductions total: 78.4%

That leaves you with (100% - 78.4%) = 21.6%

21.6% of £139 is £30.02