Existing tax credit claimants

Universal credit and tax credits

Under the Government’s welfare reform plans, tax credits are ending. To continue getting support, most existing tax credit claimants will be expected to claim universal credit or pension credit, depending on their age. However, even if you don’t claim universal credit or pension credit, your tax credits award will eventually end under these plans.

Universal credit is not a like for like replacement for tax credits. Some people will be better off claiming universal credit than their current tax credits and/or other benefits, some will be about the same and some will be worse off.

The general rule is that you cannot claim tax credits (working tax credit or child tax credit) at the same time as universal credit. Where someone already getting tax credits makes a claim for universal credit, their tax credit claim will end immediately even if they are not entitled to universal credit.

  If you are already getting tax credits, it is very important to check carefully and get advice before making a claim for universal credit. Some people may be financially better off getting universal credit, others will be worse off and in that case, it is likely to be better to wait for their formal migration notice under the migration exercise as you may qualify for transitional protection.

Not all tax credit claimants will move to universal credit, some will be asked to claim pension credit instead depending on their circumstances. We explain more about this below.

A small number of people may not be invited to move to universal credit or pension credit under the formal process. They will remain in the tax credit system until it closes down.

Voluntary and natural migration to universal credit

Existing tax credit claimants can make a claim for universal credit whenever they choose. There is no need to wait for the formal migration exercise.

  It is important to check that this is the best option for you because once you make your claim for universal credit, your tax credits end and you cannot go back to tax credits – even if you are not entitled to universal credit.

Voluntary and natural migration to universal credit is outside of the formal managed exercise and it happens if you are currently getting tax credits and you:

• choose to make a universal credit claim because you believe you will be better off (or simply prefer to claim universal credit rather than tax credits)
• have a change in circumstances that ends your current tax credit claim but you still need to claim support, for example a change from joint to single household.
• need to make a claim for another benefit that has been replaced by universal credit. For example, a tax credit claimant who needs to make a claim for help with their rent would have claimed housing benefit previously. However, in most cases housing benefit has been replaced by universal credit. So for help with rent they need to make a universal credit claim which in turn will end their tax credits claim.
• don’t renew your tax credits in time and your tax credit claim can’t be reinstated so you need to make a fresh claim for support.

  If you start to claim universal credit under voluntary or natural migration you will not qualify for the transitional protection which is only part of the managed migration exercise. That is why it is important to get some advice before you choose to make a claim for universal credit if you are already getting tax credits.

However, if you received a severe disability premium (SDP) with certain social security benefits (not tax credits), you may qualify for a transitional SDP element in your universal credit award. There is more information about this on our website for advisers, Revenuebenefits.

Managed migration to universal credit

DWP and HMRC are currently running a managed migration exercise. Although it is called managed migration, it is important to understand you will not be automatically moved over and you will be expected to make a claim for universal credit yourself once you receive a migration notice from DWP. Making the universal credit claim under the formal exercise carries some financial protection in certain cases as well as some important instructions and deadlines.

Under this exercise, DWP send an important letter to tax credit claimants (as well as to people claiming other benefits universal credit is replacing) which is called a migration notice. This is a formal notice which invites you to make a claim for universal credit by a certain deadline date and also tells you that your tax credits (and other legacy benefits) will end by the date in the letter.

There is more information in our managed migration section.

State pension credit qualifying age

There is a calculator on GOV.UK that tells you when you will reach your state pension age and state pension credit qualifying age.

At present, it is possible to get pension credit and tax credits at the same time. However, now that universal credit has been introduced, HMRC say they are no longer accepting new tax credit claims. The only exception to this is for certain people who are granted refugee status. If you are not already getting tax credits, you will need to claim pension credit if you have reached state pension age (or both of you have in a couple) and you need to make a new claim for financial support. Pension credit is different to tax credits – there is no working tax credit equivalent in pension credit, nor any support for childcare costs. There are extra amounts for children in pension credit for people who are not already getting child tax credit.

Universal credit is a working age benefit. If you have reached your state pension credit age, you are generally not entitled to universal credit. If you are part of a couple and you have both reached state pension credit age you are currently not entitled to universal credit. Instead, you may be entitled to pension credit. There is one exception to this rule from 8 June 2024 which applies to existing tax credit claimants who have reached their state pension age and who currently claim working tax credit, whether or not they claim child tax credit, but who do not also currently claim pension credit).

The limited change in the rules is because people in this position will be sent a migration notice (see Managed migration to universal credit above) and invited to claim universal credit instead of tax credits. If you receive a migration notice and claim universal credit in line with the instructions and deadline dates in the notice, the maximum age rule in universal credit will not apply to you. However, if you subsequently claim pension credit or your transitional protection ends for another reason, your universal credit award will end and the waiver in the age rules will not apply again if you later make a claim for universal credit. If you are in this position and are sent a migration notice, but decide to claim pension credit instead of universal credit – no transitional protection will apply.

If you are part of a mixed age couple – where one person has reached their state pension credit age and the other is below their state pension credit age – then the rules are slightly more complicated. Most people who are part of a mixed age couple are only able to claim universal credit and cannot claim pension credit, although there is one exception to this. If you are part of a mixed couple who were claiming housing benefit under pension age rules on 14 May 2019 and that claim has continued you may be able to make a new claim for pension credit instead of universal credit. Most mixed age couples currently claiming tax credits will be sent a migration notice and invited to claim universal credit. There are some exceptions. Those who are already entitled to state pension credit as well as tax credits will be sent a tax credit closure notice stating the date that tax credits will stop. Those mixed age couples who qualify under the special housing benefit pension age rules explained above and who receive CTC only will be invited to claim state pension credit by way of a tax credit closure notice. Pension credit transitional protection will be given in this case.

  If you are in this position, you should get some specialist advice. Our understanding is that you are not prevented from claiming universal credit but if you do, you will not be able to claim pension credit and you may receive more money via pension credit than universal credit. A welfare rights specialist can help you decide which benefit is best to claim.

State pension age and tax credits closure notice

Because tax credits are ending, existing tax credit claimants who have reached their state pension qualifying age (this includes people in a mixed age couple if they are already claiming housing benefit under pension age rules and have continued to do so since May 2019) who are currently claiming child tax credit but are not entitled to working tax credit, will be sent a tax credits closure notice and be expected to claim pension credit for support instead. You will also be sent a tax credit closure notice if you have reached your state pension qualifying age and you are currently entitled to tax credits and pension credit at the same time.

All other tax credit claimants who have reached state pension age or are in a mixed age couple will be sent a migration notice and invited to claim universal credit instead. A very small number of existing tax credit claimants will not be invited to claim universal credit or pension credit and in those cases tax credits will end by April 2025.

The tax credits closure notice will explain that your tax credits award will end by a date specified in the notice. People in this group may or may not already be claiming pension credit when they receive their tax credits closure notice and new transitional protection rules will apply, in a similar way to transitional protection for people moving over to universal credit, to ease the transition.

DWP have said from August 2024, they will start to contacting people claiming tax credits who have reached their state pension qualifying age and to tell you when your tax credits will be ending and ask you to claim either universal credit or pension credit instead, depending in your circumstances. You should note that DWP will be selecting whether you are invited to claim universal credit or pension credit but they can treat a tax credits closure notice as a migration notice if it is issued by mistake but they will tell you if this happens.

If you have reached state pension credit age (or are part of a couple where both have reached state pension credit age) and currently get tax credits then:

• If you have a change of circumstances that ends your tax credits award, you will not be able to make a new claim for tax credits and instead will have to claim pension credit if you require financial support. The rules for pension credit are different to tax credits so whether you qualify for any payments depends on your circumstances including any savings you have.
• If your circumstances don’t change, then from August 2024 DWP/HMRC will contact you to tell you your tax credits are ending and at the same time invite you to make a new claim to continue getting support. You will be asked to apply for either universal credit or pension credit depending on your circumstances. If you are already claiming state pension credit when you get your tax credits closure notice or you make your new claim for universal credit or pension credit in line with the deadline dates and instruction in the tax credits closure notice or the migration notice (whichever you are sent) then some transitional protection may be available.

If you are part of a mixed age couple who is able to make a new claim for pension credit due to the exception explained above and you currently get tax credits then:

• If you have a change of circumstances that ends your tax credits award, you will not be able to make a new claim for tax credits. If you have not yet had your tax credits closure notice or migration notice, you may be able to make a claim for pension credit. Our understanding is that you are not prevented from claiming universal credit but if you do, you will not be able to claim pension credit and you may receive more money via pension credit than universal credit. If you are in this situation you should get specialist welfare rights advice before claiming either pension credit or universal credit.