Universal credit: Policy changes

In this section we summarise UC changes that have been announced but not yet implemented.

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. As yet, there is no date confirmed for when this will be introduced.

Once implemented, 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.

Budget announcements October 2018

Several changes affecting Universal Credit were announced by the Chancellor in his October 2018 Budget:

  1.  Changes to the work allowance for households with children and people with disabilities will be increased by £1,000 per annum from April 2019.
  2.  From October 2019, the maximum rate at which deductions can be made from a Universal Credit award are to be reduced from 40% to 30% of the standard allowance and from October 2021, the period over which advances will be recovered will be increased from 12 to 16 months.
  3.  The temporary de minimis which currently applies in the surplus earnings rules of £2,500 will change from 1 April 2020 when it will revert to £300, as originally intended. Previously this was due to revert in April 2019.
  4.  From July 2020, Income Support, Jobseeker's Allowance (Income-Based), and Employment Support Allowance (Income-Related) claimants will continue to receive support for a fortnight during their transition to UC.
  5.  The minimum income floor will apply to all gainfully self-employed UC claimants after a 12 month grace period. This measure will be effective from July 2019 for those who are 'managed migrated' to UC by DWP and from September 2020 for claimants joining UC as a result of a change of circumstance. Currently, the MIF applies to all new UC claimants unless they are within the first 12 months start-up period of their business. 
  6.  The timetable for transferring rent support, for those who have reached their qualifying age for state pension credit, from Housing Benefit to Pension Credit has been revised. The transfer of rent support from Housing Benefit to Pension Credit will be delayed by three years, to October 2023.
  7.  The schedule for managed migration (the process by which the DWP will move people to UC from legacy benefits) is updated. The Government announced that the managed migration exercise will start in July 2019, with completion by December 2023. The Office for Budget Responsibility (OBR) have built in a 6-month contingency to this schedule for the purpose of costing and so quote start date of January 2020, with completion by June 2024.

Last reviewed/updated 14 May 2019