How to Survive Unemployment: Managing Your Money When You Lose Your Job
Published 1st of February 2017·Updated 2 April 2026
Reviewed by: Reviewed for accuracy April 2026
When you lose your job, the most important thing you can do in the first week is get a clear picture of your finances: what money is coming in, what is going out, and how long your savings will last. Acting quickly protects your credit file, reduces stress, and keeps your options open.
Short Summary
Claim Universal Credit as soon as you stop working, even if you are not sure whether you qualify. There is a five-week wait for the first payment, so the earlier you apply, the sooner money arrives. Apply online at gov.uk/universal-credit.
Contact every lender you owe money to before you miss a payment. Most mortgage lenders, credit card providers and utility companies have hardship teams who can offer payment deferrals, reduced payments or temporary interest freezes for customers facing a sudden loss of income.
Redundancy pay is not taxable up to £30,000. If you receive a redundancy payment, factor it into your budget alongside your benefits entitlement, savings and any other income to understand exactly how long you can manage before you must find new work.
Keeping your outgoings low during unemployment is not just about survival; it protects your credit score. Missing payments leaves negative markers on your credit file for six years. A short-term payment arrangement with your lender, agreed in advance, is far better than a missed payment.
What Are You Entitled to When You Lose Your Job?
The benefits available to you depend on your work history, savings, and household circumstances. The main options are:
| Benefit | Who qualifies | How much (2026 approximate) |
|---|---|---|
| Universal Credit | Most working-age adults not in full-time work | Varies by circumstances; standard allowance from around £393/month (single, 25+) |
| New Style Jobseeker's Allowance | Those with sufficient National Insurance contributions in the last 2 tax years | Around £90.50/week for up to 182 days |
| New Style Employment and Support Allowance | If ill or disabled and unable to work | Varies; check eligibility at gov.uk |
| Council Tax Reduction | Low-income households | Up to 100% of your council tax bill depending on your council |
You can check your entitlement using the benefits calculator on entitledto.co.uk or Turn2Us (turn2us.org.uk), both of which are free and impartial. Citizens Advice can help you navigate a complex claim.
How to Prioritise Your Bills During Unemployment
Not all debts carry the same consequences if you fall behind. Prioritise bills in this order:
Priority debts (most serious consequences if missed):
- Mortgage or rent - risk of losing your home
- Council tax - local councils can use enforcement agents (bailiffs) quickly
- Gas and electricity - suppliers can apply to disconnect (rarely done but legally possible)
- Court fines and TV licence penalties
Non-priority debts (serious but less immediately dangerous):
- Credit cards and store cards
- Personal loans
- Overdrafts
- Water bills (suppliers cannot disconnect water)
Pay priority debts first, even if that means paying non-priority creditors less or nothing for a period. If you explain your situation honestly, most non-priority creditors will accept a reduced or token payment while you are unemployed.
Should You Contact Your Mortgage Lender If You Lose Your Job?
Yes, and do it immediately rather than waiting until you miss a payment. The FCA requires mortgage lenders to treat customers in financial difficulty fairly. Most high-street lenders including Barclays, HSBC, Santander, Nationwide and Halifax have hardship teams who can offer options including:
- A payment holiday (typically 1 to 6 months)
- A temporary switch to interest-only payments
- An extension to your mortgage term to reduce monthly payments
Payment holidays are not free; interest continues to accrue during the break and is added to the outstanding balance. However, a payment holiday with your lender's agreement does not leave a negative marker on your credit file, whereas a missed payment does.
How to Reduce Your Outgoings Quickly
Once you know how much money you have and how long it needs to last, look for outgoings you can cut without affecting essentials:
- Cancel subscriptions and streaming services you can live without
- Switch to a cheaper mobile tariff (SIM-only deals from providers including SMARTY, Lebara or Sky Mobile can cost under £10 per month)
- Contact your energy supplier about the Warm Home Discount or other hardship schemes
- Check whether your council offers emergency food bank referrals, school meal vouchers, or discretionary funds for residents in crisis
- Use a comparison site such as uSwitch or Compare the Market to check whether your car, home or contents insurance can be renewed at a lower price
How Does Unemployment Affect Your Credit Score?
Being unemployed does not directly affect your credit score; unemployment is not recorded on your credit file. What damages your score is missing payments. If you manage to meet all your minimum payments during a period of unemployment, your credit score will not fall.
The risk comes when money runs tight and payments start slipping. A single missed payment can knock 50 to 100 points off your Experian score and stays on your file for six years. Contacting your lenders early and arranging formal payment deferrals or reduced payments prevents these markers appearing.
Frequently Asked Questions
How soon should I claim benefits after losing my job?
The moment your employment ends. There is a five-week wait for the first Universal Credit payment, which means any delay directly extends the period before money arrives. Apply online at gov.uk/universal-credit on the day you finish work or as soon as possible after.
Do I have to accept a payment holiday on my mortgage if I am struggling?
No, a payment holiday is optional and must be agreed with your lender. If your mortgage has sufficient overpayment reserves built up, you may be able to draw on those instead. Speak to your lender to understand all the options available on your specific mortgage product.
Will being unemployed affect my ability to get credit later?
Not directly. Lenders look at income and credit history, not employment status, when assessing applications. When you return to work, having three to six months of payslips will make you a stronger applicant. The thing that damages future credit access most is missed payments during the unemployment period, so protecting your payment record matters.
Can my landlord evict me if I fall behind on rent during unemployment?
A landlord must follow the legal eviction process, which takes time. However, missing rent payments is serious and can result in a county court judgement (CCJ) that stays on your credit file for six years. If you claim Universal Credit, the housing element can be paid directly to your landlord. Contact your local council's housing department if you are at risk of losing your home; they have a legal duty to assist people threatened with homelessness.
Is redundancy pay subject to tax?
The first £30,000 of a redundancy payment is free from income tax. Any amount above £30,000 is taxable at your marginal rate. Statutory redundancy pay is calculated based on your age, weekly pay and length of service; the government's redundancy pay calculator at gov.uk/calculate-your-redundancy-pay can give you the exact figure.
Where can I get free financial advice during unemployment?
Citizens Advice (citizensadvice.org.uk or 0800 144 8848), StepChange (stepchange.org or 0800 138 1111), National Debtline (nationaldebtline.org or 0808 808 4000) and Turn2Us (turn2us.org.uk) all provide free, impartial advice on managing finances during a period of unemployment.