Universal credit

By Tolley
  • (Updated for Budget 2020)
Universal credit

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Universal credit
  • Legacy benefits being replaced by universal credit
  • Minimum income floor used in universal credit awards
  • Universal credit and the coronavirus (COVID-19) pandemic
  • Interaction of universal credit with time to pay arrangements
  • How to make a claim for universal credit
  • The universal credit award
  • Advance payments of universal credit
  • Universal credit sanctions
  • Legislative background

Universal credit is a non-taxable benefit that is administered by the Department of Work and Pensions (DWP) and is available throughout the UK. It is available to individuals on low incomes whether they are in work, unemployed or self-employed. It is designed as a replacement for several ‘legacy benefits’. Individuals can no longer make a new claim for the legacy benefits (except in some very particular circumstances). Individuals seeking to make new claims and reporting changes in circumstances, are now directed to making a new claim for universal credit.

It is intended that by 2024, all claimants currently receiving the legacy benefits will be automatically transferred to universal credit. In the interim the natural migration to universal credit will continue through new claims and changes in the circumstances of claimants.

For more on other non-taxable benefits, see the Non-taxable state benefits guidance note.

Legacy benefits being replaced by universal credit

Universal credit is intended to replace the following tax-free benefits which are cumulatively referred to as ‘legacy benefits’:

  • •child tax credit
  • •housing benefit
  • •income support
  • •income-based jobseeker’s allowance (JSA)
  • •income-related employment and support allowance (ESA)
  • •working tax credit

Welfare Reform Act 2012, s 33

New claims cannot be made for all of the above benefits except under very particular circumstances, such as if the individual is entitled to severe disability premium. Individuals entitled to severe disability premium are required to claim the legacy benefits and are restricted from claiming universal credit.

The applicant must meet some basic and some financial eligibility requirements. More on the eligibility requirements to universal credit can be found on the GOV.UK website .

Welfare Reform Act 2012, s 3

Those still within the tax credits regime should be aware that universal credit is a replacement for tax

More on Social security benefits:
Taxable state benefits
Non-taxable state benefits
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