Warning for thousands who risk missing out on £4,950 a year as tax credits end – how to avoid it happening to YOU
THOUSANDS of households risk missing out on almost £5,000 a year as tax credits come to an end.
The government plans to move all two million claimants to Universal Credit (UC) by the end of March 2025, under a process known as managed migration.
But thousands of people who have received so-called migration notices telling them they will need to claim UC instead have failed to do so.
This could leave them around £4,950 a year – or £412.50 – worse off, according to new figures by anti-poverty charity Z2K.
If they had claimed UC before the deadline, they would have continued receiving at least this amount, the charity said.
Letters to hundreds of people on the old-style benefit started going out last year as part of the shake-up and ramped up this year.
Around 120,000 households claiming tax credits with housing benefit started receiving their letters in April.
More than 90,000 people claiming employment and support allowance (ESA) along with child tax credits will start being asked to switch from July.
Anyone who gets a notice has three months in which to make the move to Universal Credit.
If they fail to make a claim for the new benefit in time, their tax credit payments are terminated.
Even if they decide to claim after the deadline, they can still lose out on vital protections, which means they could end up with less cash.
The figures revealed that 108,690 tax credit households who received a managed migration letter between November 2022 and December 2023, had their payments stopped without making a Universal Credit claim.
So, acting as soon as you receive the managed migration notice is the only way to ensure you don’t lose out on your payments when tax credits are scrapped.
Ayla Ozmen, director of policy and campaigns at Z2K, which uncovered the figures, said: “The Department for Work and Pensions (DWP) has now cut off benefits worth over £500 million from people who have missed their deadline to move to Universal Credit (UC).
“The DWP recently announced it would speed up plans for managed migration to UC, including bringing forward the migration of 800,000 seriously ill and disabled people on Employment and Support Allowance, so it’s really critical that the next government gets this right and stops cutting off vital income.”
Experts have previously warned that managed migration poses a risk to vulnerable people who face losing money.
Top bosses at charities including Mind, The Trussell Trust, Turn2Us and the Money and Mental Health Policy Institute said last year that around 700,000 with mental health problems, learning disabilities and dementia could struggle to engage with the process.
More than 20 organisations have called on the government to halt managed migration to fix flaws in the system, which those at risk could fall through.
Will I be better off on Universal Credit?
Around 1.4million will be better off on Universal Credit, the government calculates.
A further 300,000 will see no change in payments, while around 900,000 will be worse off under Universal Credit.
Of these, around 600,000 are expected to get top-up payments if they move under managed migration, so they don’t lose out on cash immediately.
The majority of those – around 400,000 – are claiming Employment Support Allowance (ESA).
Around 100,000 are on tax credits while fewer than 50,000 each on other legacy benefits are expected to be affected.
Examples of those who may be entitled to less on Universal Credit according to the government include:
- Households getting ESA who and the Severe Disability Premium and Enhanced Disability Premium
- Households with the lower disabled child addition on legacy benefits
- Self-employed households who are subject to the Minimum Income Floor after the 12 month grace period has ended
- In-work households that worked a specific number of hours (eg lone
- parent working 16 hours claiming Working Tax Credits
- Households receiving tax credits with savings of more than £6,000 (and up to £16,000)
- But they could miss out on any future increase to benefits and see payments frozen.
Those who move voluntarily and are worse off won’t get these top-up payments and could lose cash.
Those who miss the deadline and later make a claim may also not get this transitional protection either.
The clock starts ticking on the three-month countdown from the date of the first letter, and reminders are sent via post and text message.
There is a one-month grace period after this, during which any claim to Universal Credit is backdated and transitional protection can still be awarded.
The most recent data from the DWP shows 61,130 individuals have made a claim for UC, and 39,920 awarded transitional protection.
Another 40,540 are still in the process of moving to the new benefit.
What is managed migration and who is affected?
Universal Credit is replacing six benefits under the old welfare system, commonly called legacy benefits. They are:
- Working Tax Credit
- Child Tax Credit
- income-based Jobseeker’s Allowance
- Income Support
- income-related Employment and Support Allowance
- Housing Benefit.
If you’re on any of these benefits now, you can choose to move over – but you might not be better off.
You should consider carefully what moving over means for your money, as you can’t move back once you’re on Universal Credit.
Using an online benefits calculator can help you compare and are free and easy to use from charities such as Turn2Us and EntitledTo, and it’s also worth asking them for advice.
You may be moved over to Universal Credit if you have a change in circumstances, like moving home, a change in working hours or a have a baby.
But eventually everyone will be moved over to Universal Credit.
This is known as “managed migration” and plans for this were paused due to the coronavirus pandemic.
Help claiming Universal Credit
As well as benefit calculators anyone moving from tax credits on to UC can find help in a number of places.
You can visit your local Jobcentre but searching at find-your-nearest-jobcentre.dwp.gov.uk/.
There’s also a free service called Help to Claim from Citizen’s Advice:
- England: 0800 144 8 444
- Scotland: 0800 023 2581
- Wales: 08000 241 220
You can also get help online from advisers at citizensadvice.org.uk/about-us/contact-us/contact-us/help-to-claim/.
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