If you have a million pound salary, and earn an extra pound, you get to keep 54p of it – but if you're on Universal Credit and earn an extra pound, you end up just 37p better off.
That's because the way the benefit is pulled from you as you earn – losing 63p of welfare payments for each pound earned.
Worse, this payment comes after tax has already been deducted – meaning some people see almost 75% of their money vanish.
For example, if you are on Universal Credit earning £12,500 and get a £100 pay rise, you’ll actually be just £25.16 better off as your extra earnings are taken away by income tax, National Insurance and then benefit reductions are applied.
It's particularly painful for minimum wage workers on Universal Credit, with anyone working more than 30 hours a week hit with all three deductions and keeping just £2.05 for each extra hour of labour.
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Sara Willcocks, from benefits charity Turn2us , said: “The fact that people on low wages can have more tax and income deductions than millionaires highlights how truly broken our system is.
“Universal Credit needs to work for working families. At the moment, it simply isn’t.
“If our Government has plans to tackle poverty, especially in-work poverty, our welfare safety net needs to be completely overhauled.”
There are some allowances, with people permitted to make at least £3,444 a year – or £66.23 a week – before the taper is applied, and higher allowances if you don't get help with housing costs.
But that doesn't stop what is effectively Britain's highest rate of 'tax' being applied to the people the in most need of help.
A DWP spokesman told Mirror Money said: “Universal Credit encourages people to take on more work by tapering off as they increase their earnings.”
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