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Universal credit

Updated on 12 April 2023

Tax credits and benefits

Universal credit (UC) was introduced in 2013 and is now available in all parts of the UK. It is administered by the Department of Work and Pensions (DWP) and is gradually replacing several benefits, including tax credits.

Illustration of a group of people

What is it?

UC is a single benefit run by the DWP which combines benefits for in and out of work support, housing, families and childcare costs, with additional payments for people who have disabilities or caring responsibilities.

It is gradually replacing:

  • Income-based jobseeker’s allowance
  • Income-related employment and support allowance
  • Income support
  • Working tax credit
  • Child tax credit
  • Housing benefit

When does it start?

Universal credit (UC) was introduced in April 2013 and completed its roll-out in December 2018, It is now fully available in all parts of the UK. As a result, HMRC state that it is no longer possible to make a brand new claim tax credits. The only exception to this is for certain people who are granted refugee status.

Most existing tax credit claimants will move to either universal credit or pension credit. For tax credit claimants, the move to UC is expected to be complete by the end of 2024. See our tax credits and universal credit page for more information about how existing tax credit claimants are affected by universal credit and pension credit.

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

You can find out more detail on website for advisers.

Will I be better off?

UC is worked out differently to tax credits. It is based on a monthly assessment period. Once you start claiming UC, your award will be paid monthly (usually seven days after the end of your monthly UC assessment period) and the amount you get will be based on your income and circumstances in your previous assessment period. You may get more or less than you received under the old legacy benefits system.

If you are issued with a migration notice by DWP to move to UC from tax credits under the formal managed migration process you may qualify for transitional protection. The transitional protection rules offer some temporary relaxation in the rules covering the capital limit in UC, temporary relaxation of some of the entitlement rules for students, as well as protection for the amount of your award. The Government’s broad intention is that if you do not have any changes in circumstances, you should not receive less money as a result of moving to UC, at the point that you move. This means you will be assessed for transitional protection and may receive a temporary payment included in your new UC award, with the aim of maintaining benefit entitlement to help you adjust to the new system. But this protection is temporary and any transitional element you are awarded will gradually reduce over the years if rates of UC increase or if your UC award increases because your circumstances change.

Some changes of circumstances, such as becoming part of a couple or leaving your partner, will end this protection.

If you have a change of circumstances that means you have to make a claim for UC, or you choose to claim UC or need to access another benefit that UC has replaced, you will not receive any transitional protection, so the amount of UC you get may be higher or lower than your tax credits and other benefits that UC is replacing. The only exception to this is for those who are entitled to (or were recently entitled to) a severe disability premium in certain benefits and who have moved to UC. They will receive an additional element, called the transitional SDP element , from 27 January 2021, to be included in UC awards for people who meet the qualifying rules..

Whether or not you are better or worse off depends very much on your circumstances.

Are there any things I should know about?

You cannot claim both tax credits and UC at the same. If you currently claim tax credits and you make a claim for UC, your tax credit award will terminate.

If you are able to work, you will be asked to sign a claimant commitment. The claimant commitment is tailored to your circumstances but you will be obliged to keep to it. You, and your partner, may need to both look for work of up to 35 hours a week – this is called conditionality.

You cannot claim UC if you (or both of you in a joint claim) have reached your State Pension Credit (SPC) age. In that case, you can look into claiming pension credit. Most people who are part of a mixed age couple don’t have the option to claim pension credit and are only able to claim UC, although there is one exception to this. A mixed age couple is one where one person has reach state pension credit age, but the other member of the couple has not. 

From February 2019, pension credit also includes support for children through the inclusion of a child element for each child or young person you are responsible for. It is also expected that pension credit will be changed over the coming years to include additional support for pension-age claimants who need help with expenses such as housing costs.

If you have savings, this may affect your UC award. If you have savings of £6,000 or more, then DWP will consider that you have £4.35 of income for every £250 you have over the £6,000 threshold and reduce your award accordingly. If you have savings of more than £16,000, you will not be able to get any UC. There are special rules for people who are moved across from tax credits to UC by HMRC/DWP under the formal managed migration exercise which may mean you can still claim even if you have savings of more than £16,000.

For UC, once a child reaches age 16 they become a qualifying young person and can be included in a UC claim up to (but not including) the 1st September following their 16th birthday. After that the rule is slightly different because, provided they remain in full-time non-advanced education or approved training and they were enrolled on, or started, the course before they were 19, they can only be included up to (but not including) the 1st September following 19th birthday. This is different to child benefit and to child tax credit, where a qualifying young person can be included in a claim until they reach age 20 as long as the course started before their 19th birthday.

More information

More information about UC and the transition to UC is available on our website for advisers and on the GOV.UK website on the following pages:

Tax guides

Introduction to the tax system How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? What if I cannot pay my tax bill? Do I need to complete a tax return? Self Assessment: understanding the basics What is Simple Assessment? How do I claim tax back? How do I claim back tax I have overpaid through PAYE on wages or pensions? How do I claim back tax if I complete a tax return? How do I claim back tax if I am taxed under the Construction Industry Scheme (CIS)? How do I claim back tax on savings income? How do I claim a marriage allowance refund? How do I claim back tax on a payment protection insurance (PPI) pay-out? Should I use a tax refund company? What is National Insurance? How do I get a National Insurance number? What are Specified Adult Childcare credits? What is Scottish income tax? What is devolution? Do I have to pay Scottish income tax? How does Scottish income tax work? What is Welsh income tax? Do I have to pay Welsh income tax? Do I have to join a pension scheme? Tax relief on your pension contributions HMRC digital services Enquiries, penalties, appeals, complaints and debt Enquiries How to survive an enquiry by HMRC Tax penalties Tax appeals Alternative Dispute Resolution How do I complain to HMRC? What if I cannot pay my tax bill? What if I have a tax credits overpayment?
Am I employed, self-employed, both or neither? Working through a limited company What is the national minimum wage? How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? How is tax collected on taxable state benefits? How do I check my coding notice? Do I need to complete a tax return? What tax do I pay on redundancy payments?Employment benefits and expenses What are benefits-in-kind? What payments and benefits are non taxable? What if I incur expenses in relation to my job? What travel expenses can I claim? What if I use my own car for business purposes? Payroll giving Allowances and expenses paid to armed forces personnel and deductions from their income Pensions and employees What is automatic enrolment for employees? What National Insurance do I pay as an employee? How do I repay my student loan? What if I do not pay enough tax? What if I pay too much tax? What if I work abroad temporarily? What if I am in the armed forces and work overseas? First time workers Apprenticeships

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