Money is fungible. If a salary increase of $1 leaves you with 37c in your pocket that's a de facto 63% marginal tax rate, however it happens to be structured for accounting purposes.

The salary increase of £1 leaves you with £1.37, because you get the £1 wage plus £0.37 benefits.

No, because in this setting your original take home was £1.00.

To lay it out in numbers:

BEFORE £1 pay increase: £X earnings, £Y benefits

AFTER £1 pay increase: £X + 1 earnings, £Y - 0.63 benefits

DIFFERENCE: £0.37

So a pay increase of £1 leaves you with an actual total increase of £0.37. This corresponds to an effective tax rate of £0.63.

I don't understand how this got downvoted, because it's literally what happens.

Universal credit replaces a wide range of legacy benefits. One of the legacy benefits it replaces is "working tax credits". These were payments made to people who were working and on a low income.

This part of Universal Credit "tops up" your earnings from work. They are in addition to your earnings. is.

When someone on UC starts working they get their pay from work, and on top of that they get their their universal credit minus 63 pence per pound that they earn from work.

In the past if you did more than 16 hours of work in a week all your benefit would stop, but under UC you can work over 16 hours in a week and keep the money.

Universal Credit work allowances: https://www.gov.uk/government/publications/universal-credit-...

What the earnings taper is and how this affects Universal Credit: https://www.entitledto.co.uk/help/Earnings-taper-Universal-C...

How your earnings affect payments: https://www.gov.uk/universal-credit/how-your-earnings-affect...