If you're contemplating taking on extra work, it may leave you wondering, is it worth working 20 hours a week? Finding the right work-life balance is a constant struggle for many individuals.
While working fewer hours may offer more free time, it's important to consider the impact on benefit entitlements, mortgage eligibility, and long-term financial goals.
This insight explores the question of whether working 20 hours a week is worth it, considering both the benefits of part-time employment and the potential effects on benefit entitlement, career progression, and the ability to save for a deposit and buy a house.
Ultimately, the answer to this question will come down to personal circumstances. However, here are the factors to consider when making your decision and how they relate to mortgage eligibility, benefit entitlement and ability to save.
In the UK, benefit entitlement is often linked to one's income and working hours. Working 20 hours a week is considered part-time, and it may impact certain benefits such as Universal Credit, Working Tax Credit, and Housing Benefit.
These benefits are means-tested, meaning they take into account an individual's income and the number of hours they work. As a result, increasing your working hours might reduce or even eliminate these benefits.
Let's consider the case of Sarah, a single parent who currently works 20 hours a week in a part-time job. She receives Universal Credit, Working Tax Credit, and Housing Benefit, which provide crucial financial support.
As a part-time worker, Sarah's income falls within the eligible range to receive these benefits.
However, if she decides to increase her working hours, the additional income earned might push her above the threshold, resulting in a reduction or complete elimination of these benefits.
For instance, if Sarah starts working full-time and earns a higher income, her eligibility for Universal Credit may be affected. Universal Credit is means-tested, taking into account both earned and unearned income, as well as the number of hours worked.
If her increased earnings exceed the threshold, the amount of Universal Credit she receives could decrease, ultimately impacting her overall income.
Similarly, the Working Tax Credit, designed to support individuals on low incomes, is also subject to means-testing.
Working additional hours could lead to an increase in income that exceeds the threshold for eligibility, potentially resulting in a reduction or loss of this credit.
Moreover, Sarah's Housing Benefit, which assists with housing costs, is also affected by income and working hours. If her increased income pushes her above the threshold, she may no longer qualify for this benefit or may receive a reduced amount, leaving her with a higher share of housing costs to bear.
It's important to note that the exact impact on benefit entitlement can vary depending on various factors, such as individual circumstances, household composition, and regional variations in benefit policies.
Therefore, it is advisable for individuals considering changes to their working hours to consult with local benefit offices or seek professional advice to understand the specific implications for their situation.
In summary, working 20 hours a week is considered part-time in the UK, and it may currently make Sarah eligible for benefits like Universal Credit, Working Tax Credit, and Housing Benefit.
However, increasing her working hours could result in reduced or eliminated benefits, as these programs are means-tested, taking into account an individual's income and the number of hours worked. It is crucial for individuals to carefully assess the impact on their benefit entitlement before making any decisions regarding their working hours.
In the UK, if you work more than 16 hours, you lose your entitlement to jobseekers allowance.
While reducing work hours may maintain benefit entitlements, it's important to consider the potential impact on career progression. Working fewer hours can hinder opportunities for promotion, skills development, and increased earning potential.
Career advancement often requires commitment, dedication, and a willingness to invest time in gaining experience. Therefore, it's crucial to strike a balance between part-time work and career aspirations.
One of the key long-term goals for many individuals is to save for a deposit and buy their own home. Here, the decision to work 20 hours a week should be evaluated in the context of how it impacts savings potential.
Although working more hours can provide a higher income, it may also demand more time, potentially limiting the opportunity to save. On the other hand, working fewer hours might offer more free time for side gigs or additional training to improve career prospects and ultimately increase earning potential.
Working 20 hours a week may have an impact on getting a mortgage, as lenders typically consider an applicant's income and employment stability when assessing mortgage eligibility. While it is possible to obtain a mortgage on universal credit or with part-time employment, there are certain factors to consider:
Mortgage lenders typically evaluate an applicant's income to assess their ability to make regular mortgage payments.
With part-time employment, the income may be lower compared to full-time work, and this could affect the amount you can borrow. Lenders will calculate the affordability based on your income, taking into account factors like regularity, stability, and future prospects.
Lenders also consider employment stability when reviewing mortgage applications. If you have been consistently working part-time for a considerable period and can demonstrate a steady income, it may be seen as more favourable compared to recent part-time employment or irregular income patterns.
Demonstrating a stable employment history can help strengthen your mortgage application.
When applying for a mortgage, having a substantial deposit is beneficial. As working fewer hours may result in a lower income, it can require more time to save for a deposit. Lenders generally require a percentage of the property's value as a deposit, and having a larger deposit can improve your chances of securing a mortgage with favourable terms.
Working 20 hours a week can impact State Pension contributions in the UK. National Insurance contributions (NICs) are crucial for qualifying for the full State Pension. If earnings fall below the Lower Earnings Limit, NICs may not be made, potentially affecting entitlement to the State Pension.
As NICs are directly related to earnings, working part-time with lower income may result in making fewer NICs compared to full-time work. It's important to monitor NICs record, consider credits or voluntary contributions to fill gaps, and seek guidance from the government's Pension Service or a pension advisor to understand the specific impact on State Pension contributions.
If you work 20 hours a week, your Universal Credit payment could be around £333.74 due to the 55% taper rate.
This considers a standard allowance of £368.74, a housing element of £515, and the reduction from your earnings. Actual payments vary based on factors like work allowance and specific circumstances.
If you work earn £1000 a month, your Universal Credit payment could be around £333.74 due to the 55% taper rate.
This considers a standard allowance of £368.74, a housing element of £515, and the reduction from your earnings. Actual payments vary based on factors like work allowance and specific circumstances.
The Universal Credit Loophole £1500, also known as the £1,500 Savings Rule, benefits claimants with savings or capital below £16,000, providing them with an extra £1,500 in benefits. This rule aims to support individuals with limited financial resources more than those with savings.
Its purpose is to provide crucial financial support to those with modest savings, helping them meet their basic needs and maintain a decent standard of living.
Working more than 20 hours a week could potentially affect entitlement to the Universal Credit £1,500 Savings Rule if you are able to save money from your employment.
Develop a solid financial plan that takes into account your long-term goals, including saving for a deposit and buying a house.
Consider consulting a financial adviser who can help you navigate the complexities of balancing work and financial stability.
If you're unsure on where to start with seeking advice on how whether it is worth working 20 hours a week for mortgage purposes, or applying for a mortgage, Sunny Avenue can help you. Complete the Sunny Fact Find for Mortgage advice.
The answers you provide help to find the best-suited adviser for your needs. Your adviser contacts you for a chat on how they can help. You decide how to proceed.
Determining the answer to the question, "Is it worth working 20 hours a week?" requires a careful evaluation of individual circumstances, benefits entitlement, and long-term goals. While reducing work hours may impact benefit entitlements, it is essential to consider the potential consequences on career progression and the ability to save for a deposit and buy a house.
Stuart is an expert in Property, Money, Banking & Finance, having worked in retail and investment banking for 10+ years before founding Sunny Avenue. Stuart has spent his career studying finance. He holds qualifications in financial studies, mortgage advice & practice, banking operations, dealing & financial markets, derivatives, securities & investments.
Our website offers information about financial products such as investing, savings, equity release, mortgages, and insurance. None of the information on Sunny Avenue constitutes personal advice. Sunny Avenue does not offer any of these services directly and we only act as a directory service to connect you to the experts. If you require further information to proceed you will need to request advice, for example from the financial advisers listed. If you decide to invest, read the important investment notes provided first, decide how to proceed on your own basis, and remember that investments can go up and down in value, so you could get back less than you put in.
Think carefully before securing debts against your home. A mortgage is a loan secured on your home, which you could lose if you do not keep up your mortgage payments. Check that any mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.