Move to UC begins for tax credit claimants

The move of tax credit claimants to Universal Credit began in April 2023, according to the Office for Budget Responsibility's Welfare trends report published on 23 June 2026¹. The report states that the Department for Work and Pensions "began with tax credit claimants in April 2023, enabling the tax credit system to be closed in April 2025"¹. Advice NI, an independent advice organisation, also records that "Since April 2023, Tax Credits claimants are being required to move their claim to UC"².

The OBR report examines fraud and error in welfare, defined as a claimant receiving more than they are entitled to, with the excess called an overpayment¹. It reports that the overall rate of welfare fraud and error rose from 3.1 per cent of spending in 2019-20 to 4.3 per cent during the Covid years of 2020-21 and 2021-22, then fell back to 3.2 per cent over the following four years, close to its pre-pandemic level¹. The rise and fall were concentrated in Universal Credit: the UC fraud and error rate rose from 9.4 per cent of UC spending in 2019-20 to 14.7 per cent in 2021-22, before falling to 8.5 per cent in 2025-26¹.

The OBR attributes the initial rise mainly to operational easements introduced at the start of the pandemic, including "the suspension of gainfully self-employed checks to verify self-employed status and the removal of the minimum income floor in March 2020"¹. It says the minimum income floor and gainfully self-employed checks were reinstated in August 2021¹. Among claimants who joined UC between 14 March 2020 and 27 February 2021, the so-called Covid cohort, the fraud and error rate was 25.8 per cent of spending in 2020-21, against 9.8 per cent among pre-existing cases that year¹. That cohort's overpayment rate fell by nearly two-thirds, to 8.9 per cent in 2025-26, while the rate among pre-existing cases rose slightly from 9.8 per cent in 2020-21 to 11.7 per cent in 2022-23¹.

The report also sets out how the transition to UC changed the pattern of fraud and error. It says capital- and housing-related overpayments averaged around 0.4 per cent of combined UC and legacy spending between 2011-12 and 2018-19, but have averaged 2.1 per cent since 2019-20¹. It notes lower in-work fraud and error for employees in UC than in the legacy system, largely because UC's monthly assessment removed the in-year overpayments reconciled at year-end that featured in the annually assessed tax credits system, which averaged 1.7 per cent of spending between 2011-12 and 2018-19¹.

On staffing, the OBR reports that DWP increased staff addressing fraud and error from 4,700 in 2020-21 to 15,000 in 2025-26, with plans for further increases¹. It also records that, announced in 2022, DWP had an additional 6,900 full-time equivalent staff undertaking reviews of UC cases at highest risk of fraud and error by March 2025¹. Separately, it notes that in October 2021 DWP announced it would temporarily hire an additional 2,500 full-time equivalent staff until March 2025¹.

Why it matters for households

Tax credit claimants are the first group being required to move their claim to Universal Credit, under a process that began in April 2023¹. The OBR's account places the closure of the tax credit system in April 2025¹. For households still on tax credits, the practical effect is that entitlement moves to UC, where awards are assessed monthly rather than annually¹. The OBR notes that UC's monthly assessment removed the possibility of in-year overpayments reconciled at year-end that existed under the annually assessed tax credits system¹.

The report also identifies where overpayments have become more significant under UC: capital- and housing-related fraud and error, and cases involving self-employment income, where monthly assessment and other changes have increased reporting requirements¹. Claimants who receive more than their entitlement face an overpayment, which the report defines as the amount by which an award exceeds entitlement¹. The sources do not set out how individual overpayments are recovered or the rates applied.

Advice NI states that social security benefits rose in line with inflation, by 10.1 per cent, from April 2023². It also notes that people on Jobseeker's Allowance, Employment and Support Allowance, Income Support, Child or Working Tax Credit or Housing Benefit are being urged not to move to UC until it becomes necessary, and to seek independent advice². The OBR report does not cover Pension Credit or mixed-age couple cases.

What happens next

The OBR says it plans to change its forecast methodology for fraud and error at the next forecast, removing a previous assumption that the underlying propensity for fraud and error in UC would rise each year, because the rise was concentrated in the Covid cohort and rates have returned close to pre-pandemic levels¹. It says it will monitor this and wider developments as new data becomes available¹. The report also records that EVM, announced in 2023 for implementation in 2026, increased DWP's legislative power to check claimant eligibility against capital rules with banks, and that PRE, announced in 2024 and introduced in 2025, asks claimants to periodically redeclare their circumstances¹.