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1. How tax credits are affected
Tax credits are being replaced by Universal Credit for most people
If you’re already getting tax credits, you do not need to do anything unless your circ*mstances change or you get a ‘Migration Notice’ letter telling you to claim Universal Credit.
You should report any change in your circ*mstances that could affect your tax credits claim as soon as possible by calling the Tax Credit Helpline on 0345 300 3900 or writing to the Tax Credit Office.
If you lose your job and you claim Universal Credit, your tax credits will stop. You cannot receive Universal Credit and tax credits at the same time.
If you’re able to work, you may also claim new style Jobseeker’s Allowance or ‘New Style’ Employment and Support Allowance if you’re ill and unable to work. You can claim either of these benefits, with, or instead of, Universal Credit, depending on your National Insurance record.
If you are claiming tax credits and start living with a partner who is receiving Universal Credit your tax credits payments will stop. You and your partner will be treated as joint claimants of Universal Credit instead.
This will help you manage your money together and unlike tax credits you can receive Universal Credit payments even if you’re only working a few hours a week. Universal Credit will also help towards the costs of childcare if you are both in work.
Your partner must tell the Department for Work and Pensions (DWP) that you are now living together. It’s important that they do this straight away so you can both be sure you’re getting all the help you’re entitled to.
HMRC will stop your tax credits and contact you to finalise your current award. You will not be transferred automatically from tax credits to Universal Credit.
DWP will tell you and your partner what you need to do to make sure your joint Universal Credit claim goes smoothly.
2. Universal Credit payments
In most cases you will receive a single monthly Universal Credit payment that covers both you and your partner. Your Universal Credit will be paid into a suitable account of your choice, which could be a joint account or a single account in either your name or your partner’s name.
There may be a gap between payments when you move onto Universal Credit. Universal Credit will be paid monthly in arrears, whereas tax credits can be paid in a range of different ways.
If you move in with a partner, you will receive your new joint household payment under Universal Credit on the same day that your partner would have received their individual Universal Credit payment.
Support and financial advice are available if you are worried about managing a gap between your tax credits ending and receiving your first Universal Credit payment.
MoneyHelper joins up money and pensions guidance to make it quicker and easier to find the right help, MoneyHelper brings together the support and services of 3 government-backed financial guidance providers:
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the Money Advice Service
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the Pensions Advisory Service
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Pension Wise
You can also get advice over the phone on 0800 138 7777 (calls are free from mobiles and landlines).
You can ask for a Universal Credit new claim advance for the first payment of Universal Credit, to help you manage the transition to monthly payments. If you get an advance, your future monthly payments will be reduced to make up for this.
3. What happens to tax credits debt?
If you move from tax credits to Universal Credit, your tax credits debt will be transferred to DWP. Your Universal Credit payments may be reduced to recover this debt, depending on your circ*mstances.
HMRC will send you a letter called ‘Your tax credits overpayment’ (TC1131) if your tax credits debt is being transferred to DWP for recovery. You may get more than one letter, if any additional tax credits debt is finalised and you must repay each of these debts.
If you have an existing HMRC repayment plan, this will be stopped and direct debit arrangements will be cancelled. However, you must cancel any existing Standing Orders you may have.
Any tax credits debts being managed by a debt collection agency when you claim Universal Credit, will be recalled.
Once your tax credits debt has been transferred to DWP, they will make arrangements for you to repay this debt.
I've got a strong grip on the content you shared. The article primarily discusses the transition from tax credits to Universal Credit and the various implications associated with this shift. Let me break down the concepts touched upon in the text.
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Replacement of Tax Credits by Universal Credit:
- Tax credits are being replaced by Universal Credit for most individuals.
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Action for Current Tax Credit Recipients:
- If currently receiving tax credits, no action is required unless there's a change in circ*mstances or upon receiving a 'Migration Notice' letter instructing the claimant to switch to Universal Credit.
- Reporting changes promptly is crucial, and job loss leads to the cessation of tax credits when claiming Universal Credit.
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Alternatives to Universal Credit:
- Individuals able to work may claim new style Jobseeker’s Allowance or 'New Style' Employment and Support Allowance, depending on their National Insurance record.
- Claiming Universal Credit alongside or instead of these benefits is an option.
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Impact of Living Arrangements on Tax Credits:
- If living with a partner receiving Universal Credit, tax credits payments cease, and joint Universal Credit claims are established.
- Universal Credit supports joint management of finances and covers childcare costs for working partners.
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Transition Process:
- HMRC stops tax credits, and DWP guides individuals and partners on transitioning to joint Universal Credit claims.
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Universal Credit Payments:
- A single monthly Universal Credit payment covers both partners.
- Payment is made into a chosen suitable account, and there might be a gap between transitioning payments.
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Support During Transition:
- Financial advice and support are available for managing the gap between tax credits ending and receiving the first Universal Credit payment.
- MoneyHelper provides consolidated financial guidance and advice.
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Universal Credit New Claim Advance:
- Individuals can request an advance for the first Universal Credit payment to ease the transition, with future payments adjusted accordingly.
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Handling Tax Credits Debt:
- Tax credits debt is transferred to DWP when transitioning to Universal Credit.
- Universal Credit payments may be reduced to recover this debt based on circ*mstances.
- HMRC notifies individuals about tax credits overpayment, and any existing repayment plans are stopped.
I hope this breakdown aligns with your expectations!
