Working Tax Credits and Child Tax Credits were first introduced in April 2003 as a means tested benefit to provide financial help to those eligible to claim. However, after 20 years the current system is coming to an end with a potential move across to Universal Credit as the alternative.

Families or individuals who are currently receiving tax credits should soon receive a migration letter explaining the change and what they need to do if they intend to apply to move across to Universal Credit. It is important to apply before the deadline in the letter otherwise the tax credits payments will stop but there will not then be the opportunity to take advantage of the migration across.

There are independent benefits calculators online that can be used to check how your payments will be affected and what they may change to under Universal Credit instead of tax credits. https://www.gov.uk/benefits-calculators 

Sometimes claimants will be entitled to the same amount they received from their previous benefits, and sometimes they will be eligible for more or less under Universal Credit. If the amount you are entitled to on Universal Credit is less, a top up amount is available. This is known as Transitional Protection. You can get the Transitional Protection if you have received a Migration Notice letter from DWP and you make a claim by the deadline date on your letter.

Another significant difference is that if you claimed tax credits in the past it did not matter if you had savings in excess of £16,000 providing the other qualifying conditions were met. However, this can prevent a successful claim for Universal Credit. It has been announced that for one year only, having savings over £16,000 will be disregarded when the migration across takes place, but it will then be necessary for claimants to review their savings on a timely basis, as after 12 months the Universal Credit payments will stop if you still have savings of over £16,000.

If you have any questions concerning the end of tax credits and the migration across to Universal Credit please get in touch.

By Rachel Coates (Tax Manager)

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