Universal credit

Produced by Tolley

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

  • Universal credit
  • Legacy benefits being replaced by universal credit
  • The ‘new style’ employment and support allowance and ‘new style’ jobseeker’s allowance
  • 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
  • Joint claim for universal credit
  • The universal credit award
  • Universal credit surplus earnings threshold
  • More...

Universal credit

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’, primarily tax credits. Individuals can no longer make a new claim for tax credits. 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’:

  1. child tax credit

  2. housing benefit

  3. income support

  4. income-based jobseeker’s allowance (JSA)

  5. income-related employment and support allowance (ESA)

  6. working tax credit

Welfare Reform Act 2012, s 33

New claimants for the legacy benefits will be directed to make a claim for 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.

The ‘new style’ employment and support allowance and ‘new style’ jobseeker’s allowance

It may also be possible for an unemployed person to claim the ‘new style’ JSA, or if the taxpayer cannot work due to illness, the ‘new style’ ESA. These claims are either in addition to universal credit or instead of it. See the links within the timeline on the right-hand side of the universal credit eligibility page on the GOV.UK website.

Minimum income floor used in universal credit awards

In addition to general eligibili

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