Universal Credit: How will my Universal Credit be affected if I get a tax rebate I April?

Benefit payment system Universal Credit was introduced to help eligible UK residents with their living costs. The social security payment combines six benefits for working-age people on a low household income.

The system replaced Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance (JSA), income-related Employment and Support Allowance (ESA) and Working Tax Credit.

Your Universal Credit payment is made up of a standard allowance and any extra amounts that apply to you.

How much Universal Credit you get is based on your household income, but also considers extra payments if you have children, have a disability or need help paying rent.

Because Universal Credit is based on your household income, that means a tax rebate could end up messing up your budgets.


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How will Universal Credit be affected by tax rebate?

A tax rebate is the term used for when you’ve overpaid on your tax bill and is owed a refund.

Sometimes, for a number of reasons, you may have paid more than you actually owe.

Getting a tax refund is possible whether you’re self-employed or not.

You will need to apply for a rebate from HMRC, which will then be transferred into your bank account within five to eight working days.

You might be due a refund if you answer “yes” to all of these questions:

  • Were you dismissed or made redundant part way through the tax year? Tax years start on April 6 and end on the following April 5.
  • Were you employed and paying tax through PAYE (Pay As You Earn)?
  • Are you still out of work?

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If you’re claiming Universal Credit, this is not a taxable benefit, so once you’ve been unemployed for four weeks you can claim your tax refund from HMRC.

However, it’s important to note that any income you make during an assessment period is taken into consideration when working out how much Universal Credit you receive that month.

Families on a low income earning above the £287 treshold if your payment includes housing support or £503 if you don’t, will lose 63p from their Universal Credit payment for every £1 they earn.

The point of the system is that it ”pays to work”, and your tax rebate may bring you above the taper rate threshold which could essentially affect your welfare payment.

How to claim Universal Credit

Universal Credit needs to be applied for online.

If you’re in a couple and live with your partner you will have to apply together, even though you’re not married.

You might also need to phone the Universal Credit helpline to book an interview with a work coach.

To apply, you’ll need:

  • your bank, building society or credit union account details (call the Universal Credit helpline if you do not have one)
  • an email address
  • information about your housing, for example how much rent you pay
  • details of your income, for example payslips
  • details of savings and any investments, like shares or a property that you rent out
  • details of how much you pay for childcare if you’re applying for help with childcare costs

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