What is unearned income

The DWP may make deductions for other income aside from take-home pay ('earned income'). This is referred to as 'other income' in benefit statements and as 'unearned income' in legislation.

Unearned income is deducted from the claimant's universal credit payments on a pound for pound basis. Unlike earned income there is no taper, so if a claimant has £100 of unearned income in an assessment period, £100 will be deducted from their universal credit payment.

Only specific sources of unearned income are counted for deductions purposes. Any income that is not classified as unearned income in the regulations is ignored. Ignored income that remains in the claimant's possession can still be counted as savings or capital.

Unearned income which is deducted

Unearned income that is deducted from universal credit includes:

• jobseeker's allowance

• employment and support allowance

• carer's allowance

• spousal or non-child maintenance

• income from certain types of trusts

• certain types of student loans and grants

• foreign pension payments

Income which is not deducted

Any payment which is not explicitly considered a form of unearned income is not included in these deductions.

Examples of income that do not lead to deductions include personal independence payments (PIP) and disability living allowance. (DLA)

Gifts from friends and family are not usually considered unearned income. A claimant receiving regular financial support from relatives may have to demonstrate to the DWP that this is not disguised income or capital. Claimants in this position should seek specialist benefits advice.

A benefits specialist can help a claimant look at which of their sources of income are counted as unearned income and identify exemptions.

More information

Find out more about unearned income and how to access specialist advice.

Advice on what is and is not counted as unearned income

Find DWP guidance providing an overview of different types of unearned income on parliament.uk.

Chapter H5 is a full, technical breakdown of unearned income written to guide DWP decisions. Read chapter H5 of the DWP's advice for decision making on Gov.uk.

Advice for professionals

Child Poverty Action Group run an advice line for professional advisers to consult with benefit specialists. Find out more about the Advice for Advisers helpline at Cpag.org.