Redundancy Pay

(asked on 13th May 2020) - View Source

Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, whether redundancy payments with limited tax liability under the Income Tax (Earnings and Pensions) Act 2003 are treated as capital in the assessment period in which they are received, as opposed to income under Regulation 54 of the Universal Credit Regulations 2013; whether those payments are not counted as earnings or surplus earnings for the purposes of a universal credit award; and whether those payments are assessed as capital for that award.


Answered by
Will Quince Portrait
Will Quince
This question was answered on 22nd May 2020

For those who are made redundant and make a claim to Universal Credit (UC), their redundancy payments, with limited tax liability under the Income Tax (earnings and Pensions) Act 2003, are treated as capital. A claimant’s capital is taken into account to determine their entitlement to UC and in the calculation of their UC award.

If capital exceeds £16,000 (after having deducted allowable disregards, such as, personal injury compensation payments) there will be no entitlement to UC.

Redundancy payments treated as capital are therefore not taken into account as earnings, nor would the surplus earnings rules apply to them.

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