Redundancy and Universal Credit

Reviewed: September 2026

Qualifying termination payments may count as capital when received, which could affect your Universal Credit under standard capital rules. Our calculator estimates the impact without claiming entitlement.

Capital, not income

Under standard Universal Credit rules, qualifying termination payments (such as redundancy and genuine compensation) count as capital when you receive them — not as earnings. PILON, holiday pay and wages may affect UC differently as earnings in an assessment period.

Source:GOV.UK — Universal Credit money, savings and investments

Standard capital thresholds

• Below £6,000: no capital reduction under standard rules
• £6,000 to £16,000: reduction of £4.35 per £250 (or part of £250) above £6,000
• Above £16,000: normally no Universal Credit entitlement