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Managed Migration: April Uprating and timing of the claim

Legacy benefit claimants who have received their Managed Migration Notice should think carefully about the timing of their UC claim. The exact date on which they make their claim can have a big impact on the amount of their UC going forward, when they receive their UC payments and also when they have to report things like childcare costs and self-employed earnings.

Here we are looking at how that decision may be impacted by the April benefit uprating. Those moving onto UC through the Managed Migration process are given a window of three months in which to start their UC claim. For some, this will allow them a choice of whether to start their new UC claim before benefit uprating takes place in April 2024, or afterwards.

Most benefits go up by 6.7%, on the following dates:

  • UC from Assessment Periods starting on or after 8th April 2024
  • Tax Credits from 6th April 2024
  • Housing Benefit from 1st April 2024 (or after any rent-free weeks that cover that date);
  • Legacy DWP benefits (IR-ESA / IS / IB-JSA), from the claimant’s first benefit week starting on or after 8th April - this is generally governed by the day of the week on which they receive payments.

There is no single answer as to whether it is better to delay a UC claim until after the above dates or not, each case will depend on the claimant’s financial and other circumstances, and how likely they are to change in future. Until we see it working in practice, there is also possible uncertainty in how the DWP will choose to interpret some of the transitional provisions.  We give some general factors and illustrative examples below, to help advisors and their clients arrive at the best-informed choice they can.

The Transitional Element (TE) in most cases will be the claimant’s Total Legacy Amount (TLA), minus their Indicative UC Amount (IUCA) - an imaginary amount of UC. This means that the TE will tend to be increased if the TLA is higher, and also if the IUCA is lower. These amounts are worked out in respect of their Migration Day - which is the day before start of their first UC Assessment Period. Actual UC awarded at the end of the first Assessment Period may differ.

Some factors to be aware of:

  • If a legacy claimant will be better off on UC than on their legacy benefits, then delaying their UC claim will mean they are missing out on the increase in the meantime. However, in some cases that would need to be offset against a possible increased Transitional Element if they delay a claim until after uprating takes effect (see example of Janice, ‘paying rent’ below).
  • If a claimant migrating onto UC will have a change of circumstance after they start to receive a Transitional Element, the effect of which is to increase their maximum UC amount, then that could erode or remove their Transitional Element (apart from increases to or the addition of the Childcare Costs Element). Ideally such changes will be timed to occur during or before the first UC Assessment Period, to avoid erosion.
  • In particular, if someone makes their claim before 8th April 2024 and is entitled to a Transitional Element, they may see little or no gain from the subsequent uprating.
  • Due to Tax Credits and other benefits not uprating on the same day, it may be possible to get various outcomes by claiming UC on different dates, provided it’s still a 'qualifying claim' completed in the 3 month window.

 

Simple example – ESA and Tax Credits, and better off on UC

Steven gets PIP Daily Living, Income-Related ESA, and is in the Support Group.  His partner Marlene gets Carers Allowance for looking after Steven. They get Child Tax Credit for their son. They own their own home, and are not expecting any significant changes of circumstance until their son leaves school in two years.

They are in one of the 'discovery areas' and receive a Managed Migration Notice in March 2024, giving them the option of claiming UC before or after benefit uprating takes place in April. They are advised that due to the amount of the LCWRA Element they will be better off on UC than on ESA, and so will not need, or qualify for, any Transitional Element. Neither of them will have any work-related requirements, so they see no reason for any delay in claiming UC. 

They claim UC and become £78 per month better off. Benefit uprating operates as normal, i.e. their UC further increases by 6.7% from the Assessment Period beginning on or after 8th April.

 

More complex example – Tax Credits only, needs a UC Transitional Element

Janice is a lone parent, she works part-time and brings home £722.45pcm. She owns her home, and gets Child and Working Tax Credits, (including a Disabled Worker Element) of £221.32 per week / £961.69 per month. She has avoided voluntarily claiming UC because she has been advised that without Transitional Protection, moving on to UC would leave her over £300 per month worse off.

She receives a Managed Migration Notice dated 15th February 2024, giving her a deadline day of 16th May to claim UC. Janice seeks further advice, and finds that with benefit rates due to increase, and also with Tax Credits being uprating before UC, she has a choice to make:

1. If she makes her claim for UC before 6th April, her Transitional Protection will be calculated as follows:

Janice’s legacy Tax Credit income per month is £961.69. Her maximum UC at the 2023/24 rates will be her Standard Allowance plus a Child Element = £683.74. Subtracting £50.29 of assessable earnings gives an Indicative UC Amount of £633.45.

Her Transitional Element = [£961.69 – £633.45] = £328.24.

Janice’s actual UC award received after the first Assessment Period is then [£683.74 + 328.24] - £50.29 = £961.69.

The benefit uprating which occurs in the first Assessment Period beginning on or after 8th April erodes her Transitional Element by the amount of the increase, so it has no net effect. She remains on £961.69 of UC throughout 2024/25, and any uprating in April 2025 would further erode any remaining Transitional Element.


2. If she claims UC on exactly 8th April:

From the start of the new tax year on 6th April, Janice finds that her Tax Credits will have provisionally increased in line with the 2024/25 tax credit rates, to the equivalent of £1038.97. DWP work out her Indicative UC on the rates that apply on her migration day (7th April), which means they use the lower 2023/24 UC rates (and the income figure given by HMRC). This means her indicative UC is still £633.45. Her Transitional Element is therefore [£1038.97 - £633.45] = £405.52

In May she receives her first UC payment. It will be paid at the 2024/25 rates.

Her maximum UC is £726.78, to which we add the Transitional Element of £405.52. This is then reduced by her assessable income of £66.09^, giving a total award of £1066.21. Janice therefore receives £1066.21 per AP for the rest of 2024/25.
^Her wage will have increased due to the increase to the minimum wage, and work allowance is being uprated.


3. If she migrates after 8th April,

Janice’s Total Legacy Amount is the provisionally uprated tax credits of £1038.97, as above. Her IUCA is now also based on the 2024/25 rates and is [£726.78 – £50.29* of assessable earnings] = £676.49. Janice’s TE is therefore the difference between = £362.48.
* Based on the income figure being used by HMRC.

Janice’s actual UC going forward into 2024/25 will be [£726.78 +£362.48] - £66.09= £1023.17


These amounts are illustrative, and do rely on some assumptions about Janice’s wages, and how both HMRC and DWP will handle this process in practice. 

 

But it could be that migrating before 6.4.24 will leave Janice on the same as her 2023/24 tax credits amounts; migrating after that date will leave her better off on effectively the 2024/25 tax credit rates; while migrating exactly on 8.4.24 could leave her better off again, due to the anomaly of her indicative UC and her legacy benefits being based on different years.

NOTE: If Janice was on daily living PIP she could request a Work Capability Assessment and if she is found to have a Limited Capability for Work and Work Related Activity, would have the LCWRA Element included in her UC award from after the 3 month ‘relevant period’. This would erode her Transitional Element to nil (but it would be an Element that can’t be eroded and would increase in April 2025 in line with April uprating)

 

When might someone not want to wait for the increased Transitional Element?

What if Janice was not a homeowner, but had instead moved into rented accommodation just before getting her MM notice, for which she is paying £140 a week in rent?

In this case Janice can no longer start a claim for Housing Benefit, she needs to claim UC in order to get help with the rent.

Janice may find that she is now better off on UC because her award would include a Housing Costs Element. But because DWP have said they would not take the potential Housing Costs Element into account when working out the IUCA if the claimant is not getting any Housing Benefit (see this briefing for how this works) she would still receive a Transitional Element as calculated above.

This adds an extra factor when considering when she should claim UC. While she delays waiting for the April uprating before claiming UC Janice is going without the UC Housing Costs Element. Even after taking into account the reduced Work Allowance that goes with the Housing Costs Element, she is missing out on £468.07 a month of UC [£606.67- £138.60], in the hope of a future gain after uprating of £104.52 a month (for potentially 12 months). If she has the resources to cover the rent in the meantime, and she is reasonably confident there should be no change of circumstance that would erode her Transitional Element in the next year or so (i.e. she’s not going to be found to have a LCWRA, move in with a partner, have a second child), she could risk delaying for a few weeks in order to migrate on 8th April. She would need to be aware that there is always a risk of DWP not interpreting the transitional provisions in the expected way.

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