Universal credit: Tax credits and UC

Tax credits are gradually being replaced by Universal Credit (UC). This page gives an overview of the relationship between tax credits and UC.

The general rule
New tax credit claims
Existing tax credit claimants
UC claims by tax credit claimants
Moving back to tax credits from UC

The general rule

The general rule is that you cannot claim tax credits (working tax credit and/or child tax credit) at the same time as Universal Credit. 

However, this rule does not apply during the first assessment period for UC after two people become a couple and the tax credit award of the ‘new claimant partner’ terminates after the first date of entitlement to UC. This is because in such a case UC rules may treat the claim as made at an earlier date than the TC termination date.

New tax credit claims

Most people will no longer be able to make a brand new tax credit claim.

The legislation that prohibits tax credit claims by people who live in UC full service areas (which are from December 2018 is all areas of the UK) is found in the various UC roll-out commencement orders. Broadly speaking, they prohibit the making of a tax credit claim (as well as housing benefit and income support claims) on any date where the person would be able to make a UC claim. See our 'current eligibility to claim' section which explains the two groups (those entitled to the severe disability premium and frontier workers) who are currently prohibited from making UC claims even if they live in UC full service areas - they will be allowed to make new tax credit claims.

A claim for tax credit is made by the person on the date which the person takes 'any action which results in a decision on a claim being required under the relevant Regulations' and it is deemed irrelevant that the tax credit regulations might allow longer backdating which could take the tax credit claim start date back to a date before the person's area was part of the UC full service - however these regulations stop such a situation from being possible.

As is usual with broad rules, there are some exceptions where new tax credit claims can be made:

Under normal tax credits legislation, there is no entitlement to tax credits without a claim. Due to the annual cycle of tax credits, there are periods where potentially a person (or couple) could be receiving payments of tax credits but not have 'entitlement' to tax credits under the Tax Credits Act 2002 and so not fall under the provision above which requires 'entitlement' to tax credits for it to apply. This situation is covered by provisions is Universal Credit (Transitional Provisions) Regulations 2014 which treat certain people as having made a claim for tax credits for the current year for UC purposes (even if they technically have not for tax credit legislation purposes).

A person is treated as entitled to WTC or CTC (or both) with effect from the start of the current tax year even though a (Section 14) decision has not been made on their claim providing they were entitled to WTC or CTC (or both) for the previous tax year and:

Existing tax credit claimants

At present, existing tax credit claimants are not currently affected by the roll-out of UC. From July 2019, DWP will start testing the migration process with a view to increasing numbers from November 2020.

The only way existing tax credit claimants can move to UC is if they:

We explain more in our 'existing tax credit claimants' section.

UC claims by tax credit claimants

We noted above that existing tax credit claimants can be affected by the introduction of UC if they choose to claim UC.

If an existing tax credit claimant makes a claim for UC, their tax credit award will be terminated and HMRC will begin the stopping tax credits process. We explain more about this in our 'existing tax credit claimants' section.

Moving back to tax credits from UC

Now that UC full service has rolled out across the UK, most people wanting to make a new claim will need to claim UC rather than tax credits unless one of the exceptions applies. Generally once someone is on UC, they won't be able to go back to tax credits in full service areas unless their UC claim is closed and one of the exceptions applies.

For existing claimants of legacy benefits who would receive less on UC than existing benefits if they move before transitional protection is in place, it can be important to try and remain on legacy benefits rather than moving to UC. We consider situations where existing tax credit claimants mistakenly or accidentally claim UC in our 'existing tax credit claimants' section.

NOTE: This section and indeed the whole site is about the interaction between UC and tax credits. There are similar considerations in relation to other benefits which UC is replacing and the rules about switching between them may be different.

Last reviewed/updated 18 February 2019