How will universal credit affect tax credits?

Updated on 11 December 2018

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 the 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. It is scheduled to take some years for UC to be rolled-out completely and, during this time, it is gradually becoming available in more areas and to more claimants with different circumstances.

Since November 2014, DWP has been operating two computer systems to roll-out UC. The first of these, the more basic, was referred to as ‘live’ service and could only handle more straightforward cases. The other system is known as the ‘full’ (or the ‘digital’) service and all UC claims will operate on this service once it is fully rolled out.

DWP stopped accepting brand new claims for the live service from 1 January 2018 and since then, only brand new claims for UC can be made in areas where the UC full service is available, leaving people to continue claiming the legacy benefits (including tax credits) instead of UC until the UC full service becomes available in their area.

You can use our postcode tool to find out whether you can claim UC in your area.

Those already claiming UC in live service areas will continue with their UC claims even if the live service is no longer available for new claims. In addition, those who successfully made a UC claim in a live service area which ended due to an increase in earnings, may still have their claim restarted automatically if their earnings fall within 6 months of the award ending. And, where someone joins an existing UC claim (by becoming part of a couple with an existing UC claimant) this will be classed as a change in circumstances and they can continue claiming UC as a couple. Similarly, where a couple who are already claiming UC in a live service area separate, this will also be classed as a change of circumstances and both claimants will remain on UC (if appropriate).

In areas where the full service of UC is available, it is no longer possible to claim tax credits unless an exception applies. Existing tax credit claimants will not be affected unless they have a change of circumstances that ends their tax credits claim, they choose to claim UC instead of tax credits or they need to claim UC to access help with housing costs or out of work support. It is expected that most existing tax credits claimants will be moved to UC between July 2019 and the revised date of March 2023.

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

Back to the top

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. 

Back to the top

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

At present, existing tax credit claimants are not affected by the introduction of universal credit. From July 2019, DWP and HMRC will start to move existing tax credit claimants across to UC. It is expected that this will be complete by March 2023. Not all tax credit claimants will move to UC – if you have reached state pension credit age (or in a joint claim both of you have reached state pension credit age) the intention is for you to claim pension credit instead. The full detail of this is not yet known.

The only way you will move to UC before 2019 is if:

  • You choose to make a claim for UC – if you think you may be better off by claiming UC then you might be able to claim it depending on where you live. You must get advice before doing this as you may be worse off under UC 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 already claiming UC.
  • You need to make a claim for another benefit that has been replaced by UC – for example if you live in a full service UC area and you need to claim help with your rent then you will not be able to claim housing benefit and instead will have to claim UC. This will automatically end your tax credits award.

Back to the top

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

In postcode areas where the UC full service is in place, 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 UC 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.

In full service areas, brand new claims for tax credits can no longer be made unless:

  • You (or your partner) have reached state pension credit age
  • You (or your partner) are responsible for three or more children and (broadly) you have not claimed UC in the last six months
  • You fall under a number of other technical exceptions – see our website for advisers for more detail

Back to the top

More information

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

Universal credit

Revenuebenefits – Universal Credit

Back to the top