This report describes a study undertaken by Sara Graham and Clare Stapleton, and is the second to be concerned with the important issue of the extra costs incurred by people with disabilities. The first study focused on the extra costs borne by families who have a child with a disability. That study is described in SWRC Reports and Proceedings No. 68, 'The Extra Costs Borne by Families Who Have a Child with a Disability', which was published in September 1987. Both studies have been similar in design. They have been small, exploratory and locally based and have sought not so much to yield generalisable findings as to provide useful insights and a detailed examination of the issues involved, illustrated with considerable anecdotal material. In addition, both studies indicate the problems associated with undertaking rigorous research in this complex and important area of social policy. The study described in this report was commissioned by the Department of Social Security. Its impetus arose from the Social Security Review's recommendations for reform of that part of the social security system concerned with income support for people of working age who are sick or who have disabilities. One of the recommendations of the review was for a Disability Allowance which would provide a recognition of the additional costs which people with disabilities have to meet if they are to participate in the life of the general community; for example in paid employment, further education and training. This study provides a detailed examination of the extra costs incurred in participation in these activities and attempts to explain their variation. It also draws attention to some of the methodological issues involved and would, it is hoped, be a useful precursor to any larger study which might be undertaken in this important area.