Universal credit: Changes of circumstances
Eventually, all tax credit claimants will be asked to move to Universal Credit (UC) or pension credit (depending on age) under a managed migration exercise. Before they are selected to join that exercise, existing tax credit claimants can still be affected by Universal Credit (UC) if they choose to make a UC claim, need to claim another benefit that UC has replaced or they have certain changes of circumstances that cause their tax credits claim to end and they still need to claim support. This page looks further at how changes of circumstances impact on existing tax credit claimants.
- What changes will end a tax credits claim?
- Other changes
- Changes that require claims for other benefits
UC has now fully rolled out and UC is available across the UK which means that HMRC state it is no longer possible to make a brand new claim for tax credits and people are expected to claim UC (or pension credit) instead. The only exception to this is for a certain people who are granted refugee status. If an existing tax credit claimant has a change of circumstances that ends their tax credit claim, HMRC say they will not be able to make a new claim for tax credits.
On our 'making a UC claim' page, we explain how a tax credits award is automatically brought to an end when a UC claim is made. However, even though that process exists, it does not change the obligations on existing tax credit claimants to report relevant changes of circumstances to HMRC for tax credit purposes and they should make this notification to HMRC even if they claimed or plan to make a claim for UC.
The most common scenario is a change in household status that ends a single claim (and requires a new joint claim for continued support) or a joint claim (and requires a new single claim for continued support). This may happen where a couple separate or two single people form a couple - we explain more about when joint and single claims should be made on our 'understanding couples' page.
Natasha (32) is a lone parent with two children. She claims working tax credit and child tax credit as a single person. Natasha decides to move in with her boyfriend Richard (35) on 1 March 2023. Richard does not claim tax credits or universal credit. Natasha informs HMRC on 2 March 2023 that she has moved in with Richard. HMRC terminated Natasha's working tax credit and child tax credit from 1 March 2023.
Prior to the introduction of UC, the couple would have made a fresh joint claim for tax credits. As UC is now available across the UK, HMRC state they cannot make a new joint claim for tax credits. Instead, if appropriate and depending on their joint circumstances, they will need to claim UC.
Other changes that may terminate a tax credits claim and trigger a UC (or pension credit) claim are:
- Stopping work or permanently reducing hours below the level required in the claimant's circumstances - In order to claim working tax credit, tax credit claimants must meet minimum working hours thresholds and if they fall below those thresholds permanently or stop work completely then they will need to report this to HMRC. If the claim is for working tax credit only (and there is no entitlement to child tax credit) then this change will cause the tax credit award to end.
- The claimant stops being responsible for a child or qualifying young person and they are claiming child tax credit for that child only (there is no entitlement to working tax credit) - the CTC award will terminate. If they subsequently become responsible for the child again, or any other child, they will be directed to claim UC for support.
Failing to renew their tax credits on time and HMRC cannot re-instate the claim but the claimants needs to continue claiming support. See our tax credits renewals section.
Where an existing tax credit claimant is entitled to both working tax credit and child tax credit, any change that affects only one of them will not lead to termination of the whole claim and thus will not necessarily require a new claim for UC.
Jacob is a lone parent with two children. He works 20 hours a week and is entitled to working tax credit as well as child tax credit. Jacob is made redundant and is unable to find another job. Although this will mean his working tax credit claim will end, he is still entitled to child tax credit and if he does start working above 16 hours again, he can claim working tax credit again. He will not be required to claim UC unless he needs to access another benefit that UC has replaced (see below for further information).
Say that Jacob (in the example above) needs to claim out of work support (which would previously have been income-based jobseeker's allowance in his case) and perhaps help with his rent (which would previously have been through housing benefit), then he will need to claim UC and that UC claim will terminate his child tax credit award. This is because he needs to make a claim for a benefit (or, in this case, two benefits) that have also been replaced by UC. If Jacob claims UC and then returns to work, he will not be able to claim tax credits again and will remain on UC.
There is a useful chart, produced by Newcastle Welfare Rights Unit, which shows changes that trigger a claim for UC. This version was last updated in January 2021.
Last reviewed/updated 18 May 2023