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. Some existing tax credit claimants will move to pension credit instead of UC – see our pensioners section for more information.
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 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.
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.
The legislation that prohibits tax credit claims 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:
- Where the claimant is already entitled to child tax credit and wants to claim working tax credit or they are already entitled to working tax credit and wants to claim child tax credit, WTC and CTC are two separate benefits with separate claims under Tax Credits legislation, although it has always been a joint claims process. For that reason, adding the other tax credit is not treated as a brand new tax credit claim for this purpose.
- Where the claimant is entitled to child tax credit or working tax credit for a tax year and they make (or are treated as making) a claim for the next tax year. This protects existing tax credit claimants. Technically, tax credit claims only last a maximum of one tax year and then a new claim is needed for the new tax year. This new claim is made via the annual renewals process. This exception ensures that people in that position can continue to receive tax credits and are not prevented from renewing their claims.
From 8 June 2024, where a tax credit claimant is issued with a tax credits closure notice, then the legislation says tax credits are abolished for them on either the day they make their claim for pension credit or, if later, on the deadline day stated in their tax credits closure notice. From then they will no longer be able to continue to renew their tax credit awards and their current award will be finalised under in-year finalisation rules.
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:
- No Section 17 notice has been issued (a renewals notice) in respect of the previous tax year
- A Section 17 notice has been issued but:
- the date in the notice (normally 31 July) has not yet passed so there is no claim made (or treated as made) for the current year
- a claim for tax credits has been made (or treated as made) before the date in the notice (normally 31 July) but no Section 14 decision has been made by HMRC for the current year claim
- A Section 17 notice has been given, no claim for tax credit for the current year has been made or treated as made and there is no Section 18 decision in respect of entitlement to tax credits for the previous tax year
- A Section 17 notice has been given and:
- The person made their declaration by the deadline date specified on the notice; or
- They failed to make a declaration by the deadline date but did so within 30 days of the date on their statement of account; or
- They failed to make a declaration by the deadline date but did so by the following 31 January and HMRC accept they have good reason for missing the renewals deadline.
The tax credits system will be closed down and, under current plans, it is expected there will be no live tax credit claims after 5 April 2025.. Most existing tax credit claimants will move to either universal credit or pension credit but a small number of people will not be able to claim either of those benefits and therefore their financial support from tax credits will end. The timetable for completion of the move to UC has changed several times. The latest position is set out on the GOV.UK website and outlines that tax credit claimants who are of working age and eligible to claim UC are expected to have moved over or been invited to move over to UC by the end of 2024 (migration notices generally give a 3 month deadline which means migration for notices issued at the end of 2024, may only be completed by March 2025).
From 8 June 2024, there are some changes to the upper age limit in UC specifically in relation to the managed migration and tax credit closure processes. This means that existing tax credit claimants who have reached their state pension age, are entitled to an award of working tax credit and who are not entitled to pension credit, will be sent a migration notice inviting them to claim UC by the deadline in their notice. This is because the upper age limit in universal credit has been waived for these existing tax credit claimants who are sent a migration notice.
Under these changes from 8 June 2024 existing tax credit claimants
- who have reached their state pension age and are claiming child tax credit but not entitled to working tax credit; or
- who are members of a protected mixed-age couple and who are claiming child tax credit but not entitled to working tax credit; or
- who are claiming tax credits and pension credit already
will be issued with a tax credit closure notice and, if they are not already doing so, they will be invited to claim pension credit. If they do not do so by their deadline date, tax credits will end on their deadline date. Temporary transitional protection rules will apply.
See our Pensioners section for more detailed information.
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.
Tax credits closure:
From 8 June 2024, rules come into effect which allow DWP (DfC in Northern Ireland) to issue tax credit closure notices.
The legislation allows tax credit closure notices to be issued to some existing tax credit claimants who have reached their state pension age (or certain mixed age couples, where one has reached their state pension age and the couple are claiming housing benefit under pension age rules and have continued to do so since May 2019). The tax credits closure notice will advise claimants that their tax credits award will end on the day they make a claim for state pension credit or, if later, by a date specified in the notice . The tax credit award will be finalised under the rules covering in-year finalisation.
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.
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 20 June 2024