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 provides an illustrative estimate — not entitlement.

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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