Universal credit: Policy changes

Although Universal Credit digital service is not expected to be fully rolled-out before the end of 2018, a series of policy changes have been announced throughout the roll-out period. In this section we highlight the principles of those changes.

Future Changes

Transfer of tax credit debts from HMRC to DWP

Regulations introduced in April 2015 allow DWP to recover tax credit debt concurrently with HMRC. These regulations are made under section 126 Welfare Reform Act 2012 (which allows any tax credit functions to be transferred to DWP). The regulations allow DWP to recover tax credit by any of the methods it uses to collect its own debt, including deduction from benefit and Direct Earnings Attachment.

In February 2017, the Government announced that they would exercise these powers and that from April 2018 DWP would start to recover a segment of HMRC tax credit debt from people whose tax credit claims had ended and who have not engaged with HMRC in repaying their tax credit overpayment debt. This is a more general use of the power and is not only for those people who are moving to UC (where DWP will recover tax credit overpayment debts by reducing the UC award).

In March 2018, the Office for Budget Responsibility confirmed in their March report that due to IT difficulties this has been delayed until at least October 2018.

Once implented, this means that DWP can use their Direct Earnings Attachment (DEA) powers which HMRC do not have for tax credits. This means employers must, if directed, deduct amounts from an employee's pay and send it to DWP. The amounts that can be deducted depend on whether the standard DEA rate or higher DEA rate is being used but it will be between 3% and 40% of the employee's pay after deductions for tax, national insurance and pension contributions. You can read more about DEA on GOV.UK website.

Two-child limit policy changes

Following legal action by the Child Poverty Action Group, DWP announced changes to the two-child limit policy in respect of kinship carers and adopters.

In April 2018, Esther McVey (Secretary of State for Work and Pensions) confirmed that the exceptions to the two-child limit will be extended for children who would otherwise be likely to be in local authority care and those who are adopted. This means that the exceptions willl be applied regardless of the order in which the children joined the household.

More detail about this change will be available when the regulations are published.

Last reviewed/updated 23 July 2018