So much worse off when tax credit ends and UC starts

Yamor

andrewmp said:

Yamor said:

I would actually say it slightly differently.

The aim of transitional protection is actually to ensure that UC entitlement after deductions for income should be at least as much as legacy benefit entitlement after deductions for income.

However, the issue they had was that you cannot easily compare like-with-like, as tax credits is based on a gross annual income figure, and is generally taken from the last tax year, whereas UC is based on current monthly net income.

The policy decision was therefore taken to calculate transitional protection based on a notional UC entitlement calculated using a net monthly equivalent of the gross annual income figure used by tax credits at the point of migration (for earned income). This ensures some degree of "like-with-like".

However, one result of this is that where the rules as to what counts as income differ between tax credits and UC, then the transitional protection can be wildly out.

Transitional protection seems to deal with that too, sometimes at least. 

I know that, for example, student loan income is considered unearned income for UC, but is ignored for TC.

They do/should apply the transitional protection in respect of that.

Yes, true. That's why I added "for earned income" in my post. It's only earned income where this rule applies.

Outside of the income side of the calculation, the rule also applies to the number of children included in the claim. In some cases the rules for TCs and UC are different, and a child included in the TC award will not be included in the UC award. However, for transitional protection, this will not be taken into account.