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.

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.

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

HMRC’s position is that it is no longer possible to make a brand new tax credit claim. The only exception to this is for a certain people who are granted refugee status. See below for some discussion about the lack of clarity in the legislation about this point.

The legislation that prohibits tax credit claims by is found in the various UC roll-out commencement orders. Broadly speaking, HMRC's view of the commencement orders is that 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.

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. However, see our tax credits backdating page for those granted refugee status who, in certain cases, are able to make a new tax credit claim.

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:

NOTE: HMRC’s position is that no brand new tax credit claims are possible unless the person is already claiming either WTC or CTC and wants to claim the other tax credits or they are renewing their claim. However, the legislation is not clear on this point and one interpretation of the current legislation is that other people may be able to make new claims for tax credits. We have written some guidance for advisers which provides further information about this – however, it is extremely complex and should not be followed without speaking to a welfare rights specialist.

Existing tax credit claimants

The tax credits system will be closed down eventually. Existing tax credit claimants will move to either universal credit or pension credit. The move to UC is expected to be complete by the end of 2024. We understand that tax credit claimants who have reached their state pension age and are therefore not eligible for UC will claim support through pension credit instead of tax credits. Couples where only one member of the couple has reached their state pension age will be generally expected to claim support through UC, although there are exceptions to this general rule for mixed age couples. See our Pensioners section.

There are three ways existing tax credit claimants can be affected by UC:

Voluntary migration – where people choose to claim UC rather than continue with their legacy benefits. As soon as a claim for UC is made, legacy benefits including tax credits will terminate. If there is no entitlement to UC, the person cannot return to legacy benefits.  

Natural migration – where people claiming legacy benefits have a change of circumstances and need to make a fresh claim for support that is now provided by UC

Managed migration – this is the formal migration exercise where DWP will send a migration notice to existing legacy benefit claimants to ask them to claim UC within a 3 month timeframe. Those who move to UC under managed migration may be entitled to transitional protection if they will be worse off under UC. Transitional protection is not available for those who move voluntarily or naturally as a result of a change of circumstances.

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

UC claims by tax credit claimants

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 has fully rolled out across the UK, most people wanting to make a new claim for financial support will need to claim UC (or pension credit, depending on their age/circumstances) rather than tax credits unless an exception applies. Generally, once someone is on UC, they won't be able to go back to tax credits unless their UC claim is closed and an exceptions applies.

NOTE: HMRC’s position is that no brand new tax credit claims are possible unless the person falls into an exception group, is already claiming either WTC or CTC and wants to claim the other tax credits or they are renewing their claim. However, the legislation is not clear on this point and one interpretation of the current legislation is that other people may be able to make new claims for tax credits. We have written some guidance for advisers which provides further information about this – however, it is extremely complex and should not be followed without speaking to a welfare rights specialist.

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 may 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 23 May 2022