Redundancy payment over £6,000: what happens to Universal Credit?
Crossing £6,000 in household capital does not automatically end Universal Credit. Under standard rules, capital at or below £6,000 is fully disregarded. Above that, you may facetariff income — a monthly notional income deducted from your award while capital stays in the £6,000–£16,000 band.
The three capital bands (standard rules)
| Household capital | Effect on UC (standard rules) |
|---|---|
| £6,000 or below | No tariff income from capital |
| £6,000.01 to £16,000 | Tariff income: £4.35/month per £250 (or part) above £6,000 |
| Above £16,000 | Normally no UC while capital stays above £16,000 |
Source: GOV.UK — Universal Credit money and savings.
What counts towards capital
Only qualifying termination payments (statutory redundancy, enhanced redundancy, genuine settlement compensation) count as capital when received — typically the net amount after any tax on amounts above £30,000. PILON and holiday pay are earnings, not capital. Your existing savings, ISAs, and partner's capital are combined into household capital.
Worked examples (tariff income only)
Example A: You had £2,000 savings. You receive £8,000 net qualifying redundancy. Household capital = £10,000.
- Excess above £6,000: £4,000
- £250 bands: ceil(4000/250) = 16 bands
- Tariff income: 16 × £4.35 = £69.60/month (illustrative reduction while capital stays at £10,000)
Example B: £5,500 existing + £12,000 net redundancy = £17,500. Above £16,000 — normally no UC under standard capital rules until capital falls below £16,000.
These are tariff calculations only. Your actual UC award depends on elements, earnings, housing costs, and other rules. You may still receive UC with tariff income — it reduces the award, it does not always eliminate it.
Partner capital
If you live with a partner, their savings count towards household capital. £4,000 each plus £5,000 redundancy could put you at £13,000 combined — tariff income would apply even if your individual redundancy alone stayed under £6,000.
What this means for you
- Above £6,000 is a threshold to monitor, not a cliff edge that ends all UC.
- Calculate household capital including existing savings and partner capital before and after payment.
- Spending capital does not automatically "fix" UC — deprivation of capital rules may apply if done deliberately to increase benefits.
- Report capital changes to UC when your savings change.
Caveats
Transitional protections, pension capital rules, and other disregards can apply in specific cases. This guide covers standard tariff income only. Use Turn2us for a full entitlement check.
Related guides
Estimate your capital position with the Redundancy Take Home calculator
Last reviewed September 2026. Illustrative estimates only — not a benefits decision.