Guidance

Pension Credit: closure of Tax Credits for people over State Pension age

Updated 7 August 2024

Applies to England, Scotland and Wales

This factsheet is intended for use by professional and voluntary advisers, and by members of the public who want information about the process involved in the closure of Tax Credits and the migration of people over State Pension age to Department for Work and Pension (DWP) benefits.

It is intended to be used alongside the Pension Credit technical guidance – PC10S which provides detailed information about what Pension Credit is, how it’s worked out, the eligibility rules and the application process.

Tax Credits are ending on 5 April 2025 

Eligible Tax Credit claimants over State Pension age will receive a letter from DWP informing them they will need to apply for either Universal Credit or Pension Credit if they wish to continue receiving financial support.  

The letters – called migration notices for those asked to move to Universal Credit or Tax Credit closure notices for those asked to move to Pension Credit – will be issued, starting in July 2024. The notice will specify a date by which the claim should be made (the “deadline day”), which will not be less than three months from the date the notice is issued.  

The Tax Credit award will end on the earlier of: 

• the day before the Universal Credit or Pension Credit award starts, if a claim is made on/before the deadline day or 

• the day before the deadline day if no claim is made, or the claim is made after that date.  

The deadline day may be extended provided the Tax Credit claimant requests an extension before the date is reached and there is a good reason why they are not able to apply within the original deadline.  

Those already in receipt of Pension Credit will also receive a Tax Credit closure notice. This will tell them when their Tax Credit award is to end – normally 2 months from the date of issue. A shorter notice period applies to these claimants as they will remain on Pension Credit and will not need to make a new claim. 

Which benefit will pension-age Tax Credit claimants be asked to move to? 

Pension-age Tax Credit claimants will be asked to claim Universal Credit if, on the date DWP sends them a migration notice, they are: 

• not already claiming Pension Credit 

• in receipt of Working Tax Credit or Working Tax Credit and Child Tax Credit  

• entitled to Working Tax Credit but only in receipt of Child Tax Credit (because their income has reduced their Working Tax Credit to nil) 

• a member of a mixed-age couple in receipt of Working Tax Credit and/or Child Tax Credit (but see below for the exception to this rule)     

A person who has reached State Pension age is not normally able to qualify for Universal Credit (unless they are a mixed-age couple i.e. have a partner below State Pension age).   

The rules have been amended to allow single and couple pension-age Tax Credit claimants who are sent a migration notice to claim Universal Credit, provided that claim is made no later than a month after the deadline day in the notice.  

Pension-age Tax Credit claimants will be asked to claim Pension Credit if, on the day DWP sends them a Tax Credit closure notice, they are: 

• in receipt of Child Tax Credit only (i.e. they are not also entitled to Working Tax Credit)  

Pension-age Tax Credit claimants who already have an award of Pension Credit on the day that they are sent a closure notice will remain on Pension Credit. 

Which mixed-age couples will be asked to move to Pension Credit? 

Pension-age Tax Credit claimants who are mixed-age couples will be asked to apply for Pension Credit only if: 

• they are currently entitled to pension-age Housing Benefit (which means they are also eligible to claim Pension Credit) and 

• their Tax Credit award is for Child Tax Credit only 

Pension-age Tax Credit claimants who are mixed-age couples will be asked to apply for Universal Credit if: 

• they are currently entitled to pension-age Housing Benefit but 

• their Tax Credit award is for Working Tax Credit or Working Tax Credit and Child Tax Credit 

Because a claim to Universal Credit would end their pension-age Housing Benefit award, the rules have been amended to allow these claimants to re-claim pension-age Housing Benefit provided they do so within three months of the end of their Universal Credit award. If they do not claim Universal Credit or are not entitled to it, they must re-claim within three months of the end of the Housing Benefit award (this is because the Housing Benefit award will stop when their Tax Credit award stops).  

Backdating  

When a closure notice is sent and a person is invited to claim Pension Credit, their award will start from the day after the last day of their Tax Credit award. There is no provision to allow the Pension Credit award to commence before the deadline day in the notice that they have been sent.  

Transitional protection  

Claimants who are sent a migration notice or closure notice and would otherwise see a reduction in benefit entitlement following the closure of their Tax Credit award may be considered for an additional amount to make up the shortfall. This is called a transitional additional amount. For those transferring to Universal Credit, it is called a transitional element.  

Claimants who are deferring (putting off claiming) their State Pension or a non-State Pension when their closure notice is issued, will not be treated as if they are receiving that income for up to the first 52 weeks of their Pension Credit award. As unclaimed pension income is ignored for Tax Credit purposes, this exception to the normal rules on the treatment of such notional income applies to these claimants to allow time to adjust to the new rules.  

Claimants who are awarded a transitional element in Universal Credit which ends for a reason other than being reduced to nil by increases in other elements of the award, or who claim Pension Credit, will no longer be entitled to Universal Credit. This is because the normal Universal Credit upper age limit will then apply. 

Transitional protection in Pension Credit – eligibility  

Transitional protection in Pension Credit can be considered if: 

• the person has received a Tax Credit closure notice – if they are sent a migration notice for Universal Credit but choose to claim Pension Credit instead of Universal Credit, they will not qualify for transitional protection 

• they are entitled to an award of Child Tax Credit on the day before the deadline day  

• (for new claimants) they apply for Pension Credit by the end of the one month starting on the deadline day in the notice – this allows up to one months’ grace following the closure of the Tax Credit award for those who do not claim within the 3 month deadline (or longer if the deadline has been extended) 

• they were a couple for Tax Credit purposes when the notice was issued and are members of the same couple for Pension Credit purposes on the day before the deadline day  

• they were single for Tax Credit purposes when the notice was issued and are single for Pension Credit purposes on the day before the deadline day 

Transitional protection in Pension Credit: calculation, reduction and termination 

Calculation – new claimants  

The Child Tax Credit award on the last day of that award (the day before the start of the Pension Credit award) is compared to an indicative Pension Credit amount based on the claimant’s circumstances on the same day. If the indicative Pension Credit amount is less than the Child Tax Credit award they will qualify for a transitional additional amount (TAA) which is included in the customer’s “appropriate amount” in their Pension Credit award.  

Note: these examples of the calculations are based on those in the Pension Credit technical guidance – PC10S using the same style and terminology and assume an understanding of how the Pension Credit calculation works. The examples show 4 basic calculations for a new claim and 2 calculations for an existing claim.

Example 1

Sandra is 68. She is responsible for her grandson Mark aged 13, who lives with her. Her weekly income is State Pension £205 and a pension from her former employer £65. She also gets Child Tax Credit of £76.79 a week.

At migration, her indicative “appropriate amount” is £294.94, which includes £76.79 for Mark. After deducting her pension income of £270, her indicative Pension Credit amount is £24.94 a week.

As this is less than her Child Tax Credit, she qualifies for a Transitional Additional Amount of £51.85. This increases her appropriate amount to £346.79 so after deducting her income she is entitled to Pension Credit of £76.79 a week.

Example 2 

Gary (71) and Rachel (69) are responsible for their granddaughter Kayleigh aged 15 who lives with them. Their combined weekly income from their State and private pensions is £450.70. They also get Child Tax Credit of £52.08 a week. This is less than the maximum rate as their annual income is above the Child Tax Credit income threshold. 

At migration, their indicative “appropriate amount” is £409.74, including £76.79 for Kayliegh. Their income of £450.70 exceeds their appropriate amount by £40.76. Their indicative Pension Credit award is therefore nil. 

They qualify for a Transitional Additional Amount of £93.04, made up of £52.08 plus their indicative excess income £40.76. This increases their appropriate amount to £502.78 so after deducting their income, they are entitled to Pension Credit of £52.08 a week.

Example 3  

Debbie is 72 and responsible for her granddaughter Clara, aged 12, who lives with her. Her weekly income is £205 State Pension and £65 private pension. She also gets Child Tax Credit of £76.79 a week. 

At migration, her indicative “appropriate amount” is £294.94, including £76.79 for Clara. After deducting her income, her indicative Pension Credit amount is £41.95 comprising £24.94 Guarantee Credit and £17.01 Savings Credit. Savings Credit applies because she reached State Pension age before 6 April 2016. She gets maximum Savings Credit because her income is more than the standard rate for a single pensioner (£218.15) but less than her appropriate amount.  

As her indicative Pension Credit amount is less than her Child Tax Credit she qualifies for a Transitional Additional Amount of £34.84. This increases her appropriate amount to £329.78 so after deducting her income she is entitled to Pension Credit of £76.79 a week, made up of £59.78 Guarantee Credit and £17.01 Savings Credit.

Example 4   

David (75) and Karen (73) are responsible for their two grandchildren, Jason (10) and Joanna (8) who live with them. Their combined weekly pension income is £455. They also have savings of £35,000 which is treated as providing income of £50 a week (£1 for each £500 over £10,000) They also get Child Tax Credit of £116.62 a week. 

At migration, their indicative “appropriate amount” is £476.03, including £76.79 for Jason and £66.29 for Joanna. This is £28.97 less than their income of £505 so their indicative Guarantee Credit is nil. They have an indicative Savings Credit amount of £7.46 as they both reached State Pension age before 6 April 2016 but as their income is more than their appropriate amount the maximum Savings Credit for a couple (£19.04) is reduced by 40% of the excess.  

As their indicative Pension Credit amount is less than their Child Tax Credit they qualify for a Transitional Additional Amount of £126.55, made up of £116.62 plus their indicative excess income (£28.97) minus maximum Savings Credit (£19.04) as their indicative Savings Credit amount will increase to the maximum rate in their award.  

Their Transitional Additional Amount increases their appropriate amount to £602.58 so after deducting their income they are entitled to Pension Credit of £116.62 a week, made up of £97.58 Guarantee Credit and £19.04 Savings Credit.  Calculation – existing claimants 

For existing Pension Credit claimants, the comparison is made between their Tax Credit award plus their existing Pension Credit award and their indicative Pension Credit amount as on the last day of the Tax Credit award. 

Note that amounts for children are not included in an existing award if the claimant is entitled to Tax Credits, to prevent double provision. Child Tax Credit is not treated as income but any Working Tax Credit is taken fully into account.

Example 5 

Chris (71) and Lianne (55) have a daughter Jess aged 17 who is in full-time education. Chris does not qualify for any State Pension and their only weekly income is Lianne’s earnings of £225, Working Tax Credit of £94.71 and Child Tax Credit of £76.79. They have been getting Pension Credit as a mixed-age couple since 2018. Their appropriate amount is just the standard rate for a couple (£332.95). After deducting £215 of Lianne’s earnings (after applying the couple earnings disregard of £10) and Working Tax Credit, they get £23.24 Pension Credit a week. 

At the point their Tax Credit award is closed, their indicative appropriate amount is £409.74, including £76.79 Child Addition. As the Working Tax Credit has ended, the only income to deduct is Lianne’s earnings of £215.  

Their indicative Pension Credit amount is £194.74 which equals their previous Tax Credit award plus Pension Credit, so no Transitional Additional Amount is needed. Their indicative amount becomes their new Pension Credit award.

Example 6  

Joan is 67 and responsible for her grandson Jake aged 9 who lives with her. Jake qualifies for the care component of Disability Living Allowance at the middle rate. Joan’s weekly income is State Pension and a pension from her former work totalling £228, plus Pension Credit of £35.75. Her Pension Credit is made up of her appropriate amount of £263.75 which includes the Carer Addition of £45.60, minus her pension income. She also gets Child Tax Credit of £156.80 which includes the lower-rate disabled child element of £80.01.  

At migration, Joan’s indicative appropriate amount is £376.47, comprising the standard amount for a single pensioner (£218.15) plus £45.60 carer addition, plus £76.79 Child Addition and £35.93 lower-rate Disabled Child Addition.  

After deducting her income her indicative Pension Credit amount is £148.47. Her current Pension Credit award plus her Child Tax Credit total £192.55 so she qualifies for a Transitional Additional Amount of £44.08. This equals the difference between the lower rate for a disabled child in Pension Credit and the equivalent Child Tax Credit element. 

Her Transitional Additional Amount increases her appropriate amount to £420.55 so after deducting her income (£228) she is entitled to Pension Credit of £192.55 a week. 

In some circumstances a person’s Pension Credit award may be less than their Child Tax Credit award. This could apply if the Child Tax Credit award includes an amount for a child or qualifying young person who cannot be treated as being the responsibility of the claimant under Pension Credit rules. In that situation, transitional protection will not apply in respect of the Child Tax Credit for that child or young person.

Reduction 

The Transitional Additional Amount will be reduced when any of the other amounts that make up their “appropriate amount” increase, or if a new amount is awarded or re-awarded. Once it has been reduced to nil, it cannot be reinstated.

Example 7 

At migration, Sandra (68) was awarded a Transitional Additional Amount of £51.85, which increased her appropriate amount to £346.79. After deducting her income of £270 she qualified for Pension Credit of £76.79 a week which equalled the former Child Tax Credit award she received for her grandson Mark.   

She becomes a carer for her elderly mother and is entitled to the extra amount for carers. Her Transitional Additional Amount is reduced by £45.60, the amount of the carer addition, to £6.25. Her appropriate amount is unchanged at £346.79, and her Pension Credit award remains at £76.79.

Termination 

The Transitional Additional Amount will stop if: 

• a single customer becomes a member of a couple 

• a couple cease to be treated as a couple, or form a new couple 

• the customer is no longer treated as responsible for any child or qualifying young person for whom they were receiving Child Tax Credit  

• the customer ceases to be entitled to Pension Credit 

If a person has a change of circumstances that ends their Pension Credit award before their Transitional Additional Amount has reduced to nil, any remaining amount will not be reinstated on a subsequent award.

This does not apply to those whose Pension Credit award ends solely because they move from Northern Ireland to Great Britain (or vice versa). In this situation, the new award can include a Transitional Additional Amount calculated as if the 2 awards are continuous, and there have been no other changes of circumstances.