More than a million people in England, Scotland and Wales who are eligible for – but don't currently claim – working or child tax credits should apply now or risk losing out under the incoming universal credit benefit system.

There are three main groups of people who may be eligible for working or child tax credits and who should check if they can claim (if in doubt though, check):

  • If you're a parent(s) and your household income's up to £47,000 (or up to £73,000 if you're paying for childcare).
  • If you're in a couple, both working, and have household income under £18,000 even without children.
  • If you're single, you don't have children, are working and earn under £13,000.

Contrary to their name, these credits are nothing to do with tax, they are just a payment that's made into your bank account.

The reason for the urgency is the imminent roll-out of the new universal credit system. It's already in place for all single, unemployed people, and for everyone else there's a gradual roll-out in various areas of the country which will go on until June 2018.

Universal credit is a single benefit replacing the six existing social security payments (income support, jobseeker's allowance, employment and support allowance, housing benefit, child tax credit and working tax credit).

But while 2.2 million households are predicted to gain as a result of the shake-up, it's estimated some 3.2 million will be worse off, according to the Institute For Fiscal Studies.

Martin Lewis
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'This is a no-lose scenario if you claim early'

As MoneySavingExpert.com founder Martin Lewis explains, whatever scenario you're in, you should check now and claim early.

Martin says: "The golden rule is see if you're entitled to tax credits as early as possible – then it's a no-lose situation. If you're already claiming tax credits, and the universal credit payment will be lower, then transitional protections (in place until you have a change of circumstances) mean you still stick with the higher tax credit amount once universal credit is introduced, so you're not worse off.

"If you're claiming tax credits and universal credit turns out to be higher, you'll be able to move to the new higher payment – so you're better off. The only people who will lose out are those who'd get more on tax credits, but don't start their claim until universal credit has been introduced, in which case they'll get the new lower amount.

"So EVERYONE who thinks they're eligible should check now. And even if in your area universal credit will be rolled out later, well, you'll still have the tax credits coming in sooner so you'll have more cash."

Entitledto, a company which provides online benefits calculators, estimates that some benefits recipients could be around £50 per week worse off under universal credit.

You can use this two-minute calculator developed by Entitledto to work out whether you're eligible for tax credits, how much you might get, the last date to claim in your area and whether or not you would gain under universal credit based on your circumstances.

It’s worth noting just because your household income falls below the thresholds described above, it doesn’t mean you'll definitely be eligible as many other variables determine this, including the number of hours you work each week. This is why you should check using the calculator above.

Am I likely to be eligible for tax credits – and how do I check?

Tax credits are payouts made regularly by the state into bank accounts to support those with children or in work but with low income. They're paid via the tax office. In brief, there are two types of tax credits – you can be eligible for none, one or both:

  • Working tax credits: Designed to give an extra boost to those in work on lower pay to prevent them deciding to not work entirely and just claim benefits. You may be eligible if your household income's under £18,000 (if you don't have kids – if you do, the threshold's £41,700 if you have one kid, rising to £73,100 if you have four kids).
  • Child tax credits: For those who take care of kids eligible for child benefit (under the age of 16 or up to 20 if in full-time education or registered with the careers service). You don't need to be working. You may be eligible if your household income's under £26,000 (for one kid – rising to £46,500 if you have four children).

As well as the Entitledto calculator, to check if you're entitled to claim you can take the Government's five-minute tax credits test. For full info on who's eligible see our Tax Credits guide, and to see all the benefits you could be due – not just working or child tax credits – you can use our 10-minute Benefits Check-Up

Check NOW if you're eligible for tax credits or risk losing £1,000s under benefits shake-up
Check NOW if you're eligible for tax credits or risk losing £1,000s under benefits shake-up

How do I claim tax credits?

If you're eligible to claim and don't already, apply now. Not only will you start receiving tax credits, you'll continue to receive them even after universal credit reaches your area, so long as your circumstances remain the same. That means if you would otherwise lose out under the move to universal credit, acting now lets you lock in payments at a higher rate.

To register for tax credits, contact the tax credits helpline on 0345 300 3900 or order a claim form from the Gov.uk website.

How long have I got to claim for tax credits?

The wider roll-out of universal credit begins as it's officially launched this month, with Great Yarmouth Borough Council the next local authority to introduce it at the end of April. Bath and North East Somerset, Newcastle City, Rugby Borough, Sedgemoor District and Waveney District councils are scheduled to roll it out in May.

You can find out when your local authority plans to introduce universal credit on Gov.uk – it's currently planned to be in place across the country by June 2018.

However, universal credit is already in place for most single, unemployed people who don't have children in Great Britain, and for everyone in a few areas – the London boroughs of Croydon, Hounslow, Southwark and Sutton, and Musselburgh in East Lothian, Scotland.

If you're in the above areas and situations it's too late to make a claim for the old-style tax credits – but for everyone else, there's still time.

Northern Ireland isn't undergoing the same benefits changes as the rest of the UK but will get its own form of universal credit in 2017.

Am I likely to be better off under the new universal credit system?

Last summer, George Osborne announced cuts to the universal credit work allowance, alongside cuts to tax credits. While the Chancellor later backed down over changes to tax credits, the planned cuts to universal credit allowances came in on 11 April.

The Government says no one who's already claiming tax credits by the time universal credit is introduced in their area will see a reduction in their benefits. But if you aren't already claiming tax credits by the time universal credit is introduced, if you then decide to apply for universal credit you may end up being able to claim less than you would have got under tax credits.

The changes to benefits involve many factors, but in general the Institute For Fiscal Studies says:

  • Single working parents, those with assets or couples where both are earning are mostly likely to lose out if they claim universal credit and weren't already claiming tax credits.
  • Low-earning households in rented accommodation and couples with children where only one partner earns may gain.

There are no official figures on the average amount people will lose or gain as a result of the move to universal credit. But Entitledto estimates that a single parent earning the National Living Wage of £7.20/hr, working 30 hours a week could be able to claim £53.86 less per week, while someone who is disabled and working 30 hours a week could lose out by £45.43/week.

On the other hand, a couple working 16 hours a week with children could be £99.80/week better off under universal credit.

What if I'd get more under universal credit? Should I wait rather than applying for tax credits now?

The short answer is 'no'. Of course, it's possible you'll receive more under universal credit than tax credits. But while it may be tempting to wait until universal credit rolls in, if it's more favourable to your own circumstances, overall you're likely to gain simply by claiming something straightaway. The Department for Work and Pensions estimates the average eligible person not claiming working tax credits is missing out on £1,600 per year.

If you do start claiming tax credits, then realise you'd get more under universal credit once it comes to your area, you'll be able to ask to move onto universal credit anyway – though it's not yet clear what the process for this will be.

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