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Universal credit is replacing the support that families get to pay their childcare costs through tax credits. Families already receiving tax credits do not have to do anything just now, and will remain on tax credits until they are transferred to universal credit sometime between 2019 and 2022. However, people making a new claim for tax credits (or one of the other benefits being replaced by universal credit) who live in one of the areas where universal credit is available to families, may have to claim universal credit.
So how is universal credit different to tax credits? There are many positives in relation to childcare:
However, families making a new claim for universal credit will wait at least six weeks before they receive their first payment, but can request a short-term advance for living expenses or a budgeting advance for childcare costs. In other ways, universal credit is less generous than tax credits and many families will find themselves worse off than if they had been able to claim tax credits. For example:
A couple who are looking at the mother returning to work have calculated that they will be £200 a month worse off on universal credit than they would be on tax credits, which may mean that she will not be able to afford to return to work part-time unless she works evenings and weekends when the father can look after the children.
Families transferred to universal credit from tax credits should not find themselves worse off as they will be paid at the same rate. However, they may lose this protection if they have a change in their circumstances.
The new system will create winners and losers so it is not possible to make across the board comparisons between the old system and universal credit, but parents and childcare providers need to be aware of the changes and be prepared.
The CPAG in Scotland factsheet: Tax credits: moving on to universal credit gives more information about the new system.
Or, you can contact CPAG in Scotland’s advice line for frontline workers and support workers in Scotland on 0141 552 0552 or firstname.lastname@example.org
Other articles published in our March 2017 newsletter:
Other articles about poverty: