Universal credit (UC) is a new benefit. It is administered by the Department of Work and Pensions (DWP) and is gradually replacing several benefits including tax credits.
What is it?
UC is a new single benefit run by the DWP which combines benefits for in and out of work support, housing, and childcare costs, with additional payments for people who have disabilities or caring responsibilities.
It is graudally 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?
UC was first 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 either 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 from 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.
Those already claiming UC in live service areas continue with their UC 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 six 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 that are part of the full service of UC, 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 universal credit instead of tax credits or they need to claim universal credit 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.
You can find out more detail on website for advisers.
Will I be better off?
UC is worked out differently to tax credits. Once you start claiming UC, your award will be paid monthly and the amount you get will be based on your income and circumstances in last assessment period.
If you are moved to UC from tax credits by HMRC/DWP (this will start from 2019) and you do not have any changes in circumstances, the Government has promised that they will make sure you do not receive less money as you move over to UC, but this protection will gradually reduce over the years if rates of UC increase or if your UC award increases because your circumstances have changed. Some changes of circumstances, such as becoming part of a couple or leaving your partner, will end transitional protection. If you have a change of circumstances that means you have to move to UC, you will not receive any transitional protection, so the amount of UC you get may be higher or lower than your tax credits.
The Government extended some of the rules about who will receive transitional protection and also confirmed that tax credit claimants who have capital over the £16000 eligibility limit for UC will have their capital in excess of £16000 disregarded in their UC claim for 12 months from the point at which they are moved over to UC.
The full details of UC transitional protection are not yet known.
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 in a full service area if you (or both of you in a joint claim) have reached for State Pension Credit (SPC). In that case, you can look into claiming tax credits or pension credit (possibly both, depending on your circumstances). If you’re a couple and either you or your partner has not reached State Pension Credit (SPC) age and you live in an area where UC is available to you, then you can claim either UC or the legacy benefits but it is not possible to claim both UC and tax credits at the same time. It is expected that pension credit will be changed over the coming years to include additional types of support for pension-age claimants who need help with expenses such as housing costs. Eventually, mixed age couples (where one person has reached state pension credit age and the other has not) will be required to claim UC.
If you have savings, this may affect your UC award. If you have savings of £6000 or more, then DWP will consider that you have £1 of income for every £250 you have over the £6000 threshold and reduce your award accordingly. If you have savings of more than £16000, 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 from 2019 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 about UC and the transition to UC is available on our website for advisers and on the GOV.UK website on the following pages: