Tax Credits
How they worked and what's replaced them
Tax credits have been replaced by Universal Credit and are no longer paid:
If you're already switching to Universal Credit, read more in our Moving to UC guide.
For more on Universal Credit (UC) and how to claim it, see our Universal Credit guide.
Over State Pension age? Go to our Pension Credit guide.
You can no longer get Tax Credits
Tax Credits were benefit payments designed to support those on low incomes. There were two types:
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Child Tax Credit. For people with children, whether working or not. Eligibility depended on how many children you had and the number of hours you worked.
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Working Tax Credit. For people who worked, but were on low income (whether with children or not).
If you're on a low income and need support, you'll now need to apply for Universal Credit or Pension Credit instead of Tax Credits.
If you were already claiming Tax Credits, you should have received a letter from DWP asking you to make a claim for either Universal Credit or Pension Credit. This is called a ‘managed migration notice’.
If you got a managed migration notice and then made an application to Universal Credit, you’ll get extra protections – called ‘transitional protection’. The aim of transitional protection is to reduce the chance that you’ll be worse off on Universal Credit. We cover the full details in our Moving to Universal Credit guide.
If you missed the deadline in your managed migration notice letter you can still apply for Universal Credit or Pension Credit – but you’ll have to meet all the criteria as a new applicant.
If you were overpaid Tax Credits you'll need to pay it back
Even though you'll no longer get paid Tax Credits, you may previously have been paid the wrong amount due to the way Tax Credits were worked out.
The amount you got paid in Tax Credits was worked out annually, and your award was only finalised at the end of the tax year after you’d been paid. This means that although you’ve stopped getting Tax Credits (and may have started getting another benefit, such as Universal Credit) you might have been overpaid over the course of the year.
If you were overpaid Tax Credits in the past, you’ll still have to pay it back.
If you now claim another benefit, this will usually be done through deductions from your monthly amount. If you’re now not claiming any benefit, you’ll have to come to an arrangement with HMRC, or you’ll have the amount deducted from your earnings. If you claimed Tax Credits as a couple, the debt will be split in half and each of you will get a letter about it.
If you were underpaid Tax Credits, you’ll usually get this paid back to you in a lump sum.
If you're currently claiming Universal Credit your amount will be reduced
After you start getting Universal Credit, you’ll receive a letter from HMRC called ‘Your tax credits overpayments’ or ‘TC1121 UC’. This will tell you that your debt is being transferred to your Universal Credit claim.
It’s possible to get more than one of these letters. Each will relate to a different overpayment or debt.
You don’t have to do anything when you get this letter – unless you currently pay HMRC by standing order (in which case you’ll need to ask your bank to cancel this arrangement).
The actual amount that gets taken off your Universal Credit payment may vary each month depending on your income for that assessment period. You’ll be able to see how much has been deducted from your Universal Credit payment on your monthly statement on your online journal.
If you already have an arrangement in place with HMRC you should continue to pay until you get the letter.
After you get the letter, you will need to stop paying the old arrangement, and the DWP will reduce your UC payments until you pay back the money you owe. You don’t have to do anything to set this up, though you may have to cancel any standing orders you have set up.
If you’re struggling financially because of deductions to your Universal Credit payment, you can contact the DWP and ask them to reduce how much is taken off each month – though this is decided on a case-by-case basis.
If you want to check when your repayments will end, get in touch with DWP Debt Management
Telephone: 0800 916 0647
Textphone: 0800 916 0651
Relay UK (if you cannot hear or speak on the phone): 18001 then 0800 916 0647
Video relay service for British Sign Language (BSL) users - check you can use the service
If you're unable to pay off the overpayment, it's important to get in touch with HMRC as soon as possible. They may be able to arrange a repayment plan.
If you've received the letter but not otherwise been contacted by HMRC, you can call HMRC on: 0345 302 1429
When you call, you'll need to provide your Tax Credit reference number, so make sure you've got it to hand.
If you have already been contacted by HMRC or a debt collection agency acting on their behalf, contact them using the details they’ve given you.
I already have an arrangement in place with HMRC, will I still have money taken off my UC payments?
How long will I have a reduced UC payment?
I've had a 'notice to pay' letter, but can't afford to pay, what do I do?
If you're no longer claiming benefits, you'll get a letter from HMRC - don't ignore it
HMRC may send you a ‘notice to pay’. If you get one of these letters you will be required to repay your overpaid Tax Credits within 30 days. If you’re unable to, you can ask for more time to repay to arrange a new repayment schedule.
Your debt might also be passed over to the DWP if HMRC can’t get the money you owe. The DWP is able to arrange alternative ways of recovering the money, for example by asking your employer to take money from your earnings (called a ‘direct earnings attachment’) or asking a debt collection agency to collect the money.
If you do not repay, HMRC or DWP can take you to court. If you’re threatened with court action, get advice from Citizens Advice.
If you apply for Universal Credit after a break from claiming, the DWP will usually make deductions from your Universal Credit payments in order to collect any remaining overpaid Tax Credits.
I stopped claiming benefits, but have now applied for Universal Credit, what will happen to my debt?
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