Universal Credit: How does a claim for Universal Credit affect your tax credits?


UNIVERSAL CREDIT claims have rocketed since the start of the coronavirus outbreak in the UK. Express.co.uk explains how a Universal Credit claim can affect your tax credits.

Lockdown measures in the UK are finally starting to be eased, but the coronavirus pandemic has taken its toll on the economy. Many have lost their jobs due to the crisis, prompting a dramatic uptake in Universal Credit claims. But for those looking to apply for the Government benefit, you should be aware Universal Credit can impact on how much you receive in other Government benefits.

What are tax credits?

Tax credits are a type of financial support from the Government.

In the UK there are two forms of tax credit: Working Tax Credit and Child Tax Credit.

Like many other benefits, tax credits are being replaced by Universal Credit.

But if you get the Severe Disability Premium (SDP) or are entitled to it, or got or were entitled to it in the last month and are still eligible, you can still claim tax credits.

If you are already receiving tax credits, any claims for Universal Credit will affect this.

How does Universal Credit affect tax credits?

You cannot receive tax credits and Universal Credit payments.

In fact, if you make a claim for Universal Credit your tax credits will come to an end.

This is the case even if your claim for Universal Credit is not successful.

Your tax credits will also end if you move in with a partner who is claiming Universal Credit, or your partner makes a new claim.

What happens to tax credit debts?

The Government website explains that if you move from tax credits to Universal Credit, your tax credits debt will be transferred to DWP.

The Government added: “Your Universal Credit payments may be reduced to recover this debt, depending on your circumstances.

“HMRC will send you a letter called ‘Your tax credits overpayment’ (TC1131) if your tax credits debt is being transferred to DWP for recovery.

“You may get more than one letter if any additional tax credits debt is finalised and you must repay each of these debts.

“If you have an existing HMRC repayment plan, this will be stopped and direct debit arrangements will be cancelled. However, you must cancel any existing Standing Orders you may have.

“Any tax credits debts being managed by a debt collection agency when you claim Universal Credit, will be recalled.

“Once your tax credits debt has been transferred to DWP, they will make arrangements for you to repay this debt.”

How to apply for Universal Credit

You can apply for Universal Credit via the Government website.

If you and your partner live together, you will need to apply as a couple for the benefit.

You’ll need your personal details to hand, along with a form of ID such as a driving licence, passport or debit/credit card.

What are tax credits?

How does Universal Credit affect tax credits?

What happens to tax credit debts?

How to apply for Universal Credit


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