Warning for those on tax credits ahead of payments stopping as thousands lose £100m – move to make to avoid missing cash
HOUSEHOLDS on tax credits have been issued an urgent warning after tens of thousands had their payments cut to nothing.
It comes as the government continues to move all two million claimants on legacy benefits to Universal Credit (UC) or pension credit by the end of March 2025, under a process known as managed migration.
Universal Credit was set up to replace legacy benefits.
The managed migration process began in May last year after a successful pilot in July 2019.
Eligible households are being contacted via letters in the post which tell them how to make the move from tax credits to Universal Credit.
Once you receive a letter, you have three months to move over, or you could lose your current benefits.
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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.
As a result, they've had their claim for legacy benefits stopped.
In total, 31,460 households receiving tax credits had their benefits stopped after failing to act upon a migration notice received between November 2022 and September 2023, according to the Department for Work and Pensions (DWP).
According to new figures provided to anti-poverty charity Z2K by the DWP, it means a typical household has lost out on roughly £4,130 a year.
This equates to £129.4million in benefits being stopped all because these claimants didn't switch to Universal Credit.
Ayla Ozmen, director of policy and campaigns at anti-poverty charity Z2K, which uncovered the figures, said: "These figures show that DWP has now stopped well over £100million worth of benefits for people who've missed their deadline to move to Universal Credit.
"With hundreds of thousands of migration notices set to be sent this year, including to seriously ill and disabled people receiving employment and support allowance alongside tax credits, it's vital DWP gets this right and stops cutting off vital income.
"The Department should stop putting the responsibility on people to make a new claim for Universal Credit, even if their circumstances haven't changed at all.
"But until then, anyone who gets a Migration Notice needs to act on it as soon as possible to make sure they get everything they should."
Acting once 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.
What is managed migration?
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" .
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.
There's also a free service called Help to Claim from Citizen's Advice:
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- England: 0800 144 8 444
- Scotland: 0800 023 2581
- Wales: 08000 241 220
You can also get help online from advisers at .
Will I be better off on Universal Credit?
AROUND 1.4million people on legacy benefits will be better off after switching to Universal Credit, according to the government.
A further 300,000 would 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 (e.g. 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 if they don't switch in the future, they'll risk missing 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.