Universal credit deductions for non-dependants and debt

A housing cost contribution is deducted from housing cost element if a non-dependant lives with a claimant or if a claimant owes money to DWP or other creditors.

This content applies to England

Non-dependant deductions and exemptions

A non-dependant is an adult member of the claimant's household or the 'extended benefit unit'. They are normally a family member.

Non-dependants are usually expected to contribute towards the rent and the claimant's housing cost element is reduced accordingly. A 'housing cost contribution' is equivalent to a 'non-dependant deduction' under the housing benefit rules. It applies to claimants who are renting their home in the social or private rented sectors.

The 2021/22 rate for each non-dependant is set at £75.53 each month.[1]

Claimants exempt from deductions

A housing cost contribution will not be deducted where the claimant or their partner is:[2]

  • registered blind

  • in receipt of the care component of disability living allowance (middle or highest rate), attendance allowance, the daily living component of personal independence payment or they are entitled to one of these payments, but are not receiving it as a consequence of receiving support under other legislation

Non-dependants exempt from deductions

No housing cost contribution is deducted if the non-dependant is:[3]

  • aged under 21

  • in receipt of pension credit

  • in receipt of the care component of disability living allowance (middle or highest rate), attendance allowance, the daily living component of personal independence payment or they are entitled to one of these payments, but aren't receiving it as a consequence of receiving support under other legislation

  • in receipt of carer's allowance

  • a prisoner

  • a carer of a child aged under 5

  • a child or step-child in the Armed Forces

In order to qualify for an exemption from deduction, the child or step-child in the Armed Forces must:[4]

  • be away on operations

  • have been living at the claimant's home immediately before leaving to go on operations

  • intend to return to the claimant's home

'Operations' include duty outside the UK, pre-deployment training and post-operation leave, also known as 'normalisation'.

Deductions for debts to DWP

DWP can make deductions from UC payments in respect of repayments they are owed by the claimant, such as repayments for:

  • budgeting loans and advances[5]

  • universal credit advances[6]

  • overpayments[7]

  • financial penalties in suspected fraud cases where these are accepted by the applicant as an alternative to criminal prosecution[8]

  • civil penalties imposed by DWP where an applicant has received an overpayment due to negligently providing incorrect information or failing to provide information without reasonable excuse[9]

The repayment amount will normally be based on either repaying the debt within a certain time period, or at a certain percentage of the UC award. See DWP's Benefit overpayment recovery guide for details.

Deductions for debts to other creditors

DWP can make deductions from universal credit and pay the amount to other creditors.[10] This is called a 'third party deduction'. A full list of payments in respect of which deductions can be made is given in guidance to DWP staff and includes arrears of:[11]

  • housing costs (that is payments towards mortgage interest charges)

  • rent and service charges included in rent

  • fuel costs

  • council tax

  • water charges

DWP can make third party deductions in respect of a maximum of three different debts at one time, although more than one may be made for a particular type of debt.[12] Regulations lay out an order for 'ranking' debts by type and where there are more than three debts, deductions are made in respect of the three highest in that order. [13]

The current regulations cap the overall amount that can be deducted at 40 per cent of the claimant's standard allowance.[14] The 40 per cent threshold can be exceeded if deductions are being made in respect of housing costs, fuel costs and rent (and service charges included in rent) and the DWP decides that it is in the best interests of the claimant to do so.[15]

On 16 October 2019, the DWP updated its guidance on debt and deductions from UC to specify that the maximum amount that can be deducted is the equivalent of 30 per cent of the claimant’s UC standard allowance, save as for the Last Resort Deductions (arrears of housing and fuel) and ongoing monthly costs for utilities (gas, electricity and water), where there are also arrears being repaid.

From April 2021 the maximum level of deductions has gone down to 25% of the UC standard allowance.[16]

There are also limits on the amount which can be deducted from benefit and paid to creditors in respect of specific items, such as:

  • five per cent of the claimant's standard allowance for arrears of housing costs[17]

  • a minimum of 10 per cent and a maximum of 20 per cent of the standard allowance for arrears of rent and service charges[18]

  • five percent of the standard allowance plus an estimated amount for current consumption where there are arrears of fuel (unless the claimant pays by other means such as a pre-payment meter) or water costs[19]

If a claimant faces hardship because of a third party deduction, or the total level of third party deductions, the amount taken can be reduced. This is a decision for DWP to make in accordance with its own guidance.[20]

A third party deduction will be requested by the landlord or other creditor. The claimant's consent is not required except in some cases relating to fuel and water charges.[21] A government handbook explains how the system works.

In some cases a claimant may face a third-party deduction in addition to a sanction or a deduction from benefit to repay DWP. This could result in income loss exceeding the threshold, although DWP have stated that where a person is facing a sanction of 40 per cent of this amount or more, deductions will only be made in respect of mortgage arrears, owner-occupier service charges arrears, rent and service charges arrears, and arrears of fuel charges.[22]

Deductions and debt respite breathing space scheme

During a breathing space moratorium, the DWP must not allow deductions for a third party debt to start.[23] Deductions for third party debts already in place can continue during the moratorium.

Deductions to repay magistrate court fines

Fines imposed by the magistrates' courts can be repaid through deductions from the claimant's UC award.

The relevant regulations[24] require the DWP to exercise discretion when deciding on the level of deductions.

In R (on the application of Blundell & Ors) v SSWP[25] the High Court ruled that the DWP policy of not allowing for discretion to be exercised where deductions were made for court fines was unlawful. On 11 May 2021 DWP revised its policy on benefit rates for years 2021-2022 and set the amount to be deducted for court fines at 5% of the UC standard allowance.

Bankruptcy and deductions from UC

For a claimant who is an undischarged bankrupt, the DWP cannot commence or continue to recover any overpayments of housing benefit accrued before the making of the bankruptcy order.[26] The outstanding amount of overpayment must be written off when the bankrupt claimant is discharged from bankruptcy (usually one year after the making of the bankruptcy order), except when the overpayment resulted from fraud.

After the bankruptcy period (usually one year) most of the debtor's outstanding debts accrued before the making of the bankruptcy order, including benefit overpayments, are written off. The overpayment is not written off if it resulted from fraud, in which case recovery can recommence once the bankruptcy order has been discharged.[27]

DRO and deductions from UC

There are restrictions on when the DWP can make deductions from a claimant's ongoing housing benefit if that person is subject to a debt relief order (DRO).[28]

If a claimant is subject to a DRO that includes an overpayment as a qualifying debt, the DWP cannot commence or continue to recover that overpayment.[29]

The outstanding amount of overpayment must be written off at the end of the moratorium period, except when an overpayment resulted from fraud, in which case recovery can recommence once the DRO has been discharged.

A debt relief order (DRO) is an insolvency measure designed to help certain people with no realistic chance of paying off their debts.[30] A DRO moratorium lasts for 12 months during which creditors named on the order cannot take any action to recover their money unless they have the court's permission, and after which the debtor will be released from the debts included in the order.

Breathing space and deductions from UC

If the claimant is in a standard or mental health breathing space moratorium, the DWP must stop some types of deductions.

During the moratorium the DWP must not:[31]

  • make deductions for an overpayment of benefit

  • commence new third party deductions for a moratorium debt

Deductions from Universal Credit to recover advance payments can continue.[32]

Debts incurred through fraud are excluded from the moratorium.[33] Deductions for fraudulent overpayments can continue during the moratorium period.

Last updated: 28 May 2021

Footnotes

  • [1]

    art.33(3) Social Security Benefits Up-rating Order 2020 SI 2021/162; Sch. 4 para 14 Universal Credit Regulations 2013.

  • [2]

    Sch. 4 para 15 Universal Credit Regulations 2013.

  • [3]

    Sch. 4 para 16 Universal Credit Regulations 2013.

  • [4]

    Sch. 4 para 16 Universal Credit Regulations 2013 as amended by reg 2(3)(e) Universal Credit (Miscellaneous Amendments) Regulations 2013 SI 2013/803.

  • [5]

    s.78(1) Social Security Administration Act and reg 10, Social Security (Payments on Account of Benefit) Regulations 2013 SI 2013/383.

  • [6]

    reg 10 Social Security (Payments on Account of Benefit) Regulations 2013 SI2013/383.

  • [7]

    s.71(1) Social Security Administration Act 1992.

  • [8]

    s.115A(4)(a) Social Security Administration Act 1992.

  • [9]

    s.115C(5) and s.115D(5) Social Security Administration Act 1992.

  • [10]

    reg 60 and Schedule 6, Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380.

  • [11]

    Chap D2, Advice for Decision Makers, DWP, 22 March 2013.

  • [12]

    para 3(1), Sch 6, Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380.

  • [13]

    para 5, Sch 6, Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380.

  • [14]

    para 4(1), Sch 6, Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380.

  • [15]

    para 4(4), Sch 6, Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380.

  • [16]

    LA Welfare Direct 3/2021.

  • [17]

    para 6(3), Sch 6, Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380.

  • [18]

    para 7(5), Sch 6, Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380.

  • [19]

    para 8(4), para 9(6) and para 9(7), Sch 6, Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380.

  • [20]

    See UC Continuous Improvement Note 325/14.

  • [21]

    para 3(3), sch 6Universal Credit, Personal Independence Payment, Jobseeker's Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013/380. See also para D2031 and D2032,  Advice for Decision Makers, DWP, 22 March 2013.

  • [22]

    Response to Freedom of Information request VTR 5655 ('3rd party deductions under Universal Credit'), DWP, 3 February 2014.

  • [23]

    reg.7(7)(a) The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 SI 2020/1311.

  • [24]

    regs 4(1A) and 4(1B) Fines (Deductions from Income Support) Regulations 1992 SI 1992/2182.

  • [25]

    R (on the application of Blundell & Ors) v Secretary of State for Work and Pensions [2021] EWHC 608 (Admin).

  • [26]

    Secretary of State for Work and Pensions v Payne and another [2011] UKSC 60; paras 7.110- 122, Part 7 Housing Benefit overpayments guide, DWP, 2015.

  • [27]

    Secretary of State for Work and Pensions v Payne and another [2011] UKSC 60; R (Balding) v Secretary of State for Work and Pensions [2007] EWCA Civ 1327.

  • [28]

    Secretary of State for Work and Pensions v Payne and another [2011] UKSC 60.

  • [29]

    Secretary of State for Work and Pensions v Payne and another [2011] UKSC 60; HB/CTB Bulletins U1/2012, U6/2011, U1/2011, U4/2010, G12/2010 and U5/2010; paras 7.110- 122, Part 7 Housing Benefit overpayments guide, DWP, 2015.

  • [30]

    s.251 Insolvency Act 1986 as amended by Tribunals, Courts and Enforcement Act 2007.

  • [31]

    reg.7(7)(a) The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 SI 2020/1311.

  • [32]

    reg.5(4)(j) The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 SI 2020/1311.

  • [33]

    reg.5(4)(c) The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 SI 2020/1311.