If you are receiving Tax Credits, it is crucial to watch for a letter from the Department for Work and Pensions (DWP). The UK government is replacing Tax Credits with Universal Credit, and ignoring this letter could result in your benefits being stopped.
According to MoneySavingExpert (MSE), thousands of people risk losing payments if they do not act on this notice. The final Tax Credit claims will close by April 2025, making this transition urgent for those affected.
Why Are Tax Credits Being Replaced?
The government is transitioning claimants from legacy benefits to Universal Credit to simplify the welfare system. This process, called managed migration, started in May 2022 and is expected to be completed by March 2026.
Universal Credit is replacing multiple benefits, including:
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Income Support
- Housing Benefit
What Happens If You Receive the DWP Letter?
If you are still receiving Tax Credits, the DWP will send you a Migration Notice. This letter gives you three months to apply for Universal Credit.
Failing to act in time will result in your Tax Credits being stopped. According to MSE, 30 percent of past recipients who ignored the letter lost their benefits entirely.
Will You Receive Less Money on Universal Credit?
Some claimants may find that their Universal Credit payment is lower than their current benefits. To prevent an immediate loss, the DWP offers transitional protection, which is an extra payment that covers the difference.
- This protection continues until your Universal Credit payment equals what you received before.
- If your circumstances change significantly, transitional protection may stop.
It is important to note that your Tax Credits will stop as soon as you apply for Universal Credit, and you will have to wait five weeks for your first payment.
How Will Universal Credit Affect Your Income?
The DWP states that:
- 55 percent of claimants will be better off.
- 35 percent will receive less money.
- The remaining claimants will see no change.
To check how this transition will impact you, use a free benefits calculator:
- Policy in Practice calculator
- entitledto calculator
- Turn2us calculator
If you suspect you will be financially worse off, seek advice before switching because once you move to Universal Credit, you cannot return to your previous benefits.
Other Benefits That Offer a Temporary “Run-On”
If you receive:
- Housing Benefit
- Income Support
- Income-related ESA
- Income-based JSA
These benefits will continue for two weeks after your Universal Credit application to help with the transition.
What Should You Do Next?
- Check your post regularly for a letter from the DWP.
- Use a benefits calculator to see how the change will impact your payments.
- If unsure, seek advice from Citizens Advice or Turn2Us before applying.
- Once you receive the letter, apply for Universal Credit within three months to avoid losing payments.
The transition from Tax Credits to Universal Credit is happening now, and the DWP is sending letters to notify claimants. Ignoring this letter could result in a complete loss of benefits. However, transitional protection may help those who receive less under Universal Credit. To make an informed decision, use a benefits calculator and seek professional advice before switching.
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FAQ’s
Why are Tax Credits being replaced by Universal Credit?
The UK government is phasing out legacy benefits like Tax Credits to simplify the welfare system. Everyone will be moved to Universal Credit by March 2026.
What happens if I ignore the DWP letter?
If you ignore the letter, your Tax Credits will stop after three months, and you may lose your benefits entirely.
Will I receive less money on Universal Credit?
If your Universal Credit payment is lower than your current benefits, you may get ‘transitional protection’ to cover the difference temporarily.
How long does transitional protection last?
Transitional protection lasts until your Universal Credit matches what you previously received, but it stops if your circumstances change significantly.
How long does it take to get my first Universal Credit payment?
Once you apply, it takes five weeks to receive your first Universal Credit payment. Be prepared for this waiting period.
Can I go back to Tax Credits if I switch to Universal Credit?
No, once you apply for Universal Credit, you cannot return to your old benefits.
Which benefits will continue temporarily after I switch?
Housing Benefit, Income Support, Income-related ESA, and Income-based JSA will continue for two weeks after your Universal Credit application.
Where can I check if I will be better off on Universal Credit?
Use a free benefits calculator like Policy in Practice, entitledto, or Turn2us to check if you will gain or lose money.
