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How will universal credit affect tax credits?

Updated on 28 May 2020

Tax credits and benefits

Universal credit (UC) started to be rolled out in April 2013 and is gradually replacing working tax credit and child tax credit as well as a number of other means-tested benefits. This page explains how tax credits are affected by the introduction of UC. 

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When does universal credit start?

Universal credit was introduced in April 2013 in a small number of pilot areas. To start with, only people with straightforward circumstances living in selected postcodes were able to claim.

Since December 2018, UC has been available in all parts of the UK. 

As a result, it is no longer possible for most people to make a claim for tax credits, although there are limited exceptions. Existing tax credit claimants will not be affected for the time being unless they have a change of circumstances that ends their current tax credits claim and they still need to claim support, they choose to claim universal credit instead of tax credits or they need to claim universal credit to access help with housing costs or out of work support. The Government have changed their plans for formally moving existing tax credit claimants over to universal credit several times. DWP started a pilot to test their ‘Move to UC’ processes in July 2019 and the pilot is scheduled to run until July 2020, involving no more than 10,000 people. However, due to the outbreak of the coronavirus (Covid-19) in the UK, the pilot has been suspended from March 2020. It is expected that most existing tax credits claimants will be moved to universal credit between November 2020 and September 2024.

You can find out more about who can claim universal credit in our Who can make a claim for universal credit? section.

Can I claim tax credits and universal credit together?

No. The general rule is that you cannot claim tax credits (working tax credit and/or child tax credit) at the same time as UC.

I claim tax credits now – does universal credit affect me?

Most existing tax credit claimants are not affected by the introduction of universal credit for the time being. From July 2019, DWP and HMRC started testing the migration process (called ’Move to UC’) that they will use to move people from tax credits to universal credit. This test period is scheduled to last until July 2020 and involve no more than 10,000 people, although it has been suspended from March 2020 due to the impacts of the coronavirus outbreak in the UK. Between November 2020 and September 2024, the majority of other tax credit claimants will be moved to universal credit.

It is expected that managed migration (‘move to UC’) will involve DWP writing to existing tax credit claimants asking them to make a claim for universal credit by a certain deadline date. If they do not, the tax credit claim will end the day before the deadline date. Those who are moved to universal credit through this managed migration process may receive transitional protection if the amount of UC they are entitled to is less than the total of their legacy benefits at the point they are move over – which is the Government’s way of ensuring there are no cash losers at the point of change without a change of circumstances.

Not all tax credit claimants will move to universal credit – if you have reached state pension credit age (or in a joint claim both of you have reached state pension credit age) you will not be able to claim universal credit. The intention is that you will claim pension credit.

The only way you will move to universal credit before the managed exercise begins is if:

  • You choose to make a claim for universal credit – if you think you may be better off by claiming universal credit then you might be able to claim it depending on where you live. We recommend you get advice before doing this as you may be worse off under universal credit compared to tax credits.
  • You have a change of circumstances that ends your tax credit award – for example you are claiming working tax credit only and lose your job and need to claim out of work support or you are single and move in with someone and need to make a new claim for support.

  • You need to make a claim for another benefit that has been replaced by universal credit – for example if you need to claim help with your rent then you will not be able to claim housing benefit and instead will have to claim universal credit. This will automatically end your tax credits award.

What if I want to make a new claim for tax credits?

Most people can no longer make a brand new claim for tax credits. If you already get working tax credit and want to claim child tax credit or vice versa, you are not affected by universal credit yet as this is not treated as a brand new claim to tax credits. You can contact HMRC to have the other elements added to your claim.

Similarly, if you are renewing your tax credit claim, that does not count as a brand new claim.

Broadly speaking, the only people who can make brand new claims for tax credits are:

  • People who are entitled to the severe disability premium in income support, income-based jobseeker’s allowance, income-related employment and support allowance or housing benefit or have recently been entitled and although the benefit has ended, continue to meet the entitlement conditions for the severe disability premium.

  • People who are ‘frontier workers’. Frontier workers are people who are ‘in Great Britain’ (under Section 4(1)(c) Welfare Reform Act 2012) or ‘in Northern Ireland’ (under Article 9(1)(c) of Welfare Reform (Northern Ireland) Order 2015) but do not reside in either GB or NI. Crown servants or members of HM Forces who are posted overseas (as defined under the UC Regulations 2013) .

Similarly, if you are renewing your tax credit claim, that does not count as a brand new claim.

More information

This page gives a very brief overview of the situation regarding universal credit and tax credits. For more information, please visit the following pages:

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