Should I switch to Universal Credit from Tax Credits or Income Support?
Some on legacy benefits will earn more if they switch sooner
More than 2 million people remain on 'legacy benefits' including Tax Credits and income support. But, by the end of 2024, most will have switched over to the Universal Credit (UC) system – the one-stop-shop benefit that's replacing them – but changes to the UC system mean some will be better off if they switch now.
If you're on a legacy benefit (Tax Credits, Income Support, Housing Benefit, income-based Jobseekers allowance, income-related Employment and Support Allowance), this guide has four steps to help you to decide whether to switch now, including our handy calculator which can help give an indication of whether you might receive more on Universal Credit.
This guide is for those considering moving to Universal Credit voluntarily. If you've been sent a letter letting you know that you're part of the government's 'managed migration', you'll need to follow the instructions in the letter to ensure that your benefits continue.
Step 1: Are you likely to be better off on Universal Credit than on other benefits?
Universal Credit is the new 'catch-all' benefit that's replacing six legacy benefits. For a detailed breakdown of how it works, head to our Universal Credit guide.
Anyone on one of these legacy benefits will be moved over to UC automatically (in most cases, by the end of 2024), through a process called 'managed migration'. But you can choose to switch earlier if you want. Because it's a bit different from the benefits it's replacing, some people can end up better off on Universal Credit than with their current combination of benefits.
The Government predicts up to 1.4 million people will be better off switching straight away – including those with higher childcare costs as the maximum amount of help available on UC is rising by £1,000s per year.
However, roughly 300,000 will see no change in their overall amount, while up to 900,000 will be eligible for less on Universal Credit than on their current mix of benefits.
Shelley was one of those in the 'better off' group:
I read that Martin was recommending private renters that work and claimed Working Tax Credit had a look at Universal Credit. I was scared, I have been on tax credits for a very long time, I understood it and I was familiar with it. But I took the plunge and my benefit has doubled.
|Most people who work and rent||Those who aren't in work|
|Some people who have 'higher earnings' but don't rent||Those who work but don't pay rent|
|Those who have childcare costs – particularly higher monthly costs||Self-employed workers earning less than the 'minimum income floor' (1)|
|TABLE_CELL_STYLE||Those with savings over £16,000|
|TABLE_CELL_STYLE||Some with disabilities or caring responsibilities|
If you're not included on either list, or if your situation means you identify with a mix of the groups, it's still worth taking a look at Step 2, just in case.
What you get on Universal Credit is based on earnings, savings, housing, and household circumstances, so two people the same age and earning similar amounts could get vastly different amounts.
Step 2: In the 'likely to be better off' list? Use our free calculator to check
Our calculator gives you an indication of how much Universal Credit you're likely to get, plus will give details of other benefits you might qualify for.
Importantly, it'll also tell you whether you're likely to receive MORE or LESS if you switch over from your current benefits to Universal Credit – look out for the little flag on your results page.
If the calculator shows you'd likely be better off on Universal Credit, keep reading as there are several things you NEED to be aware of before you switch.
In just 10 minutes know what you could be due
This free tool was built for MSE by benefits specialists Entitledto. Grab any info you've got on savings, income, pensions, and existing benefits – for you and your partner – before you start.
- All details will be kept anonymous.
- Most, but not all, benefits are covered.
- We aim for accuracy, but see it as a ready reckoner, to see if you should investigate more with the relevant Government department.
Please complete all fields with an asterisk (*).
Step 3: If the calculator shows you'd be better off on Universal Credit, there's more you MUST think about
Switching from legacy benefits to Universal Credit is not a decision to be taken lightly. Even if you'd potentially be better off, there are factors that might outweigh that for you. These points should help you decide:
- Important. Don't rely solely on the calculator, get free one-on-one help. Our 10-minute calculator is just a READY RECKONER. If it says you'd be better off on UC, see it as a message that "you should definitely spend time to see if you'll be better off" (and it's worth also checking all the info you put in is correct, of course).
Sadly, the Government won't give you an accurate "what you'll get" figure before you submit your Universal Credit application (in fact, it recommends calculators like ours).
So, if you think you may be better off switching, seek advice. The Government runs a free guidance and information service called MoneyHelper, which offers the option to chat (online or by phone) with an adviser – make use of it.
Plus you can get free one-on-one benefits check-ups from Citizens Advice or independent advice centres. It's best to go there before making a firm decision as this isn't one you want to get wrong, especially if you're reliant on existing benefits. It's worth telling an adviser you used the calculator, so they know there is a possibility you may be better off.
- Once you apply for Universal Credit, you can't move back. It's very important to understand if you apply for Universal Credit while claiming a legacy benefit, you CAN'T switch back – so if you end up getting less (or nothing), you're stuck with it.
However, if you wait to be moved over by the Government you'll get 'transitional protection', which tops up your benefit payment so you don't lose out. So take your time to get it right. As it's such a big decision, always talk to a benefits expert before making the switch.
- Switching now could mean you miss out on £100s in cost of living help. The state is paying people on certain benefits up to £900 to help with the rising cost of living this tax year. This will be paid in three instalments – £301 has already been paid in May, with two further instalments to follow later in the tax year.
If you get Tax Credits, income-based JSA, income-related ESA, or Income Support, you should've already received the first instalment, and qualified for the second (you just need to have received a payment of your benefit on any day between 18 August and 17 September 2023). And you'll get the third instalment provided you either stay on your current benefit, or you're forced to move over to Universal Credit as part of the government's 'managed migration' process.
HOWEVER, you may miss out on the third payment (worth £299) if you choose to switch to UC now, as we don't know what the eligibility deadline is yet. So, if the calculator shows that you'll only be slightly better off on universal credit, it's vital to speak to a benefits adviser, because you might be better off waiting to move over and getting the full remaining payments.
- Beware 'deductions' – Universal Credit payments can be reduced if you've certain debt. Up to 25% of your standard payment (the basic amount of universal credit you're entitled to) can be automatically deducted to pay off certain debts, such as council tax, energy bills, rent, and child maintenance.
While money to pay debts can also be taken from legacy benefits, often the amount taken is less than if you're on Universal Credit.
This is one of the main reasons we suggest getting one-on-one help before shifting, as the 'deductions' from universal credit may scupper the switching gain – and the calculator WON'T show you that. So ask your adviser about it.
- Don't apply online if you don't trust your partner with the finances. When you apply for Universal Credit using the Government's online form, you have to choose a single bank account into which the total universal credit payment for your household will be paid.
If you're worried that money going into an account you share with your partner may be misused, then talk to Citizens Advice before applying. It will be able to advise on whether you may be able to get universal credit via an alternative payment arrangement.
For more on this, read Martin's financial abuse blog.
- Universal Credit is usually paid directly to you as one lump sum each month – so you'll need to budget. In England and Wales, Universal Credit is paid once a month directly into your nominated bank account. It's then your responsibility to manage your finances. This may feel daunting if you're moving from smaller, more frequent benefits payments to one big one that you have to make last for the entire month.
This is especially true of those whose housing benefit was paid to the landlord. With Universal Credit it's paid directly to you, so you need to prioritise having the money to keep a roof over your head (though you can ask for the housing element of your monthly payment to be paid directly to your landlord if you struggle to budget).
If you have mental health issues, addiction problems, impulse control problems or struggle with financial management, the Universal Credit system may be difficult for you. So factor that into your decision as to whether to switch.
Scotland and Northern Ireland have some extra flexibility when it comes to receiving the payments. In Scotland, these are known as 'Scottish choices'. This means you can choose to be paid monthly or twice monthly, and – again – you can ask to get the housing element paid directly to your landlord. In Northern Ireland, it's a slightly different system and it's normally paid twice a month, though you can choose to be paid monthly.
- Universal credit requires many to do 35 hours a week of 'job-related' activities – that's five hours more than on working tax credits. Claiming Universal Credit comes with a requirement to do certain tasks, as set out in your 'claimant commitment'. Legacy benefits also have conditions, but they're often less demanding than on Universal Credit.
For example, if you're able to work, but are currently unemployed, standard work-related activity requirements on Universal Credit are 35 hours per week, compared with 30 hours on Working Tax Credit. Or if you're a single parent with a child aged between 5 and 12, you may have to spend 25 hours a week on work or work-related activities, compared with 16 hours on Working Tax Credits, which could have a huge impact on your current childcare arrangements.
You can find a full breakdown of what's expected for different scenarios on the Government's Understanding universal credit website.
Crucially, if you (or your partner) don't do something you've agreed to, your Universal Credit payment will be reduced. So before making the switch to Universal Credit, make sure you'll be able to fit in your commitments around things like childcare.
- You won't get your first payment for about five weeks. If you can't wait that long, you may be able to get an interest-free loan called an advance. This is paid back through automatic deductions to your Universal Credit payment over 24 months. If you think you'll need an advance, check the increase you'll get from switching covers the difference.
To do this, divide your advance by 24, then subtract that from your estimated monthly universal credit payment. Compare this amount with what you get on your current benefits. For example, if your advance is £500, you'll have £20.83 (500 / 24) taken from your Universal Credit payment each month for the first 24 months. To make switching worthwhile, Universal Credit would need to be paying at least £20.83 more per month than your current benefit.
- If you work and have more than one payday a month, you'll get different amounts of Universal Credit each month. Because there are different numbers of days in each month, if you're paid four-weekly, fortnightly or weekly, there'll be some months you get paid more than usual, meaning your Universal Credit payment will be lower than normal. This can make it even harder to budget and manage your money, so bear this in mind before applying.
- Switching might mean your child no longer qualifies for free school meals. To get free school meals, you have to be claiming certain benefits and earning less than a certain amount. However, the earnings limit on Universal Credit is much lower than on child tax credits (see our free school meals guide for details). So, switching to UC could mean your child no longer qualifies.
However, if you're moved onto Universal Credit as part of the 'managed migration' process, your child WILL still be able to get free school meals until they finish their current education stage (for example, primary, or secondary school).
Step 4: Want to switch to universal credit? Here's how
If you've taken advice from a benefits expert (if you've reached this point and you haven't, then do so before you apply for anything), and you're happy that moving to Universal Credit is the right thing to do, then applying is usually just a case of submitting a new claim on the Gov.uk website. If you live with your partner, you'll need to do it together.
Once you've entered all the information, you'll be shown an estimate of how much Universal Credit you'll get each month, and you'll have to declare all the information you've provided is correct. At this point, you've submitted your claim, and you can't change your mind.
If your claim's successful, you'll have an interview with a work coach at your local Jobcentre.
Once you submit a claim for Universal Credit, the process of stopping your old benefits should start automatically.
If you're on Working Tax Credit or Child Tax Credit, these payments should stop AS SOON AS you make your universal credit claim.
However, if you're getting one of following legacy benefits, you should keep getting them for TWO WEEKS after you make your Universal Credit claim:
- Income-based jobseeker's allowance
- Income-related employment and support allowance
- Income support
- Housing benefit
You DON'T need to pay back these extra payments, and they won't affect how much Universal Credit you get in your first month.
If your circumstances don't change, you'll stay on your current benefits until the Government sends you a migration notice to make the switch to Universal Credit. Currently, most on legacy benefits are due to be moved over to Universal Credit by the end of 2024.
If you're asked to move over as part of the Government's managed migration process, you'll get 'transitional protection'. This means if you're eligible for less money on Universal Credit, your payment will be topped up to the amount you currently get, so you don't lose out.
If your circumstances do change – you get a new job, or separate from your partner, for example – you may be required to move over to Universal Credit, and you won't get 'transitional protection'. The Government has a list of examples for what counts as a change of circumstances, while benefits specialist Entitledto gives an overview of how different changes in circumstances will affect your benefits.
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