Tax Credit to Universal Credit Transition

An interesting day today at the annual DWP Convention. Unusually hesitant presentations by officials and ministers. Lord Freud made several errors in his address and the general lack of certainty in the details of the new scheme, even after the Bill has left the commons, is still surprising.

I’ve been working on modelling the transition issues recently and I wanted to get some more detail about a major issue from officials – so I asked them.

Tax Credits, as you may know, are paid on an interim basis; largely calculated by the estimates of income provided by the claimant (as we’re told the current ministers now want to refer to the last administration’s ‘customers’). In the following tax year, or often the next again for the self-employed, HMRC reconcile the amount paid against the amount the claimant was entitled to and, subject to various disregards of increases or decreases in income, recover or pay the difference.

Universal Credit is meant to be paid on live, monthly incomes, although they’re still working on the details for self-employed people, so that reconciliation won’t be an issue any more.

What I want to know is how, or whether, the reconciliation will work when people move onto Universal Credit, a different benefit from a different department and paid under a different act. Even more interestingly the government has promised that transitional protection will apply to people moving onto Universal Credit and that no-one will be worse off in cash terms.

So… will claimants be expected to pay back money perhaps two years after moving onto Universal Credit? Will transitional protection apply or not to these people? Will the government just write off any under or over payments of Tax Credits at the point of transfer.

The answer – it’s being thought about! Another element in the carefully planned simple seamless system that might, just, make it a bit less simple or seamless.

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2 thoughts on “Tax Credit to Universal Credit Transition

  1. Pingback: Tax Credit to Universal Credit Transition | z2kblog

  2. Pingback: Welfare Groups Ask for Review over Universal Credit | Landlord Portfolio

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