⚠️ Universal Credit (UC) is a new benefit which will eventually replace tax credits, and some other social security benefits. Universal credit is now available across the UK and HMRC state that most people are no longer able to make a brand-new claim for tax credits and are expected to claim UC (or pension credit) instead. Existing tax credit claimants (under state pension age or in a mixed age couple) are expected to be moved across to universal credit by September 2024 following a pilot exercise involving no more than 10,000 people, although this may change due to the impacts of the coronavirus outbreak in the UK. You can find out more about this in our universal credit section.
How will universal credit affect tax credits?
Tax credits and benefits
Universal credit (UC) 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.
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, HMRC state it is no longer possible for most people to make a new claim for tax credits (there is an exception for people who are frontier workers). Existing tax credit claimants can continue with their tax credit claims and 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
- they need to claim universal credit to access help with housing costs or out of work support.
See below for more information about when existing tax credit claimants will be moved to UC.
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. If you are already getting tax credits and make a claim for UC, your tax credit claim will end immediately even if you are not entitled to UC. If you are already getting tax credits, you should get advice before claiming 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 was scheduled to last until July 2020 but it was suspended from March 2020 due to the impacts of the coronavirus outbreak in the UK. It was planned to move the majority of other tax credit claimants to UC between November 2020 and September 2024. However, the Move to UC programme is currently on hold due to the coronavirus pandemic. It is not clear whether these timescales will change.
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 moved 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 for support, instead of tax credits.
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. We recommend you get advice before doing this to check whether that is the best option for you, for example whether you will be better off.
- 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?
HMRC state that 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. Also, if you receive working tax credit which ends and you receive a four-week run-on payment, if you start work again or increase your working hours during that four-week period your entitlement to WTC should continue.
Broadly speaking, from 27 January 2021, HMRC state that the only people who can make brand new claims for tax credits 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).
⚠️ Note: The legislation which gives effect to these rules about new tax credit claims is not clear. One interpretationof the current legislation is that some other people may be able to make new claims for tax credits. We have written some guidance for advisers on our specialist website which provides further information about this – however, it is extremely complex and should not be followed without speaking to a welfare rights specialist.
This page gives a very brief overview of the situation regarding universal credit and tax credits. For more information, please visit the following pages: