DWP confirms the two benefits that won't see an increase in payments next April

Chancellor Rachel Reeves confirmed the new rates for social security payments in the Budget on October 30. Most benefits will rise by 1.7 per cent from next April, while the State Pension and guarantee credit element of Pension Credit will go up by a higher rate of 4.1 per cent.

But two benefits won't get any increase at all. These are Working Tax Credit and Child Tax Credit, both administered by HMRC.

Both these types of tax credits are being phased out as part of the accelerated rollout of Universal Credit to replace old-style legacy benefits. Tax credits were targeted first in the 'managed migration' - with 500,000 claimants asked to move over in 2023-2024 - and, as everyone is moved across, HMRC will be closing down the tax credits system for good in April 2025.

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Guidance from GOV.UK confirms that no tax credit increases will be made next year due to these legacy payments coming to an end. It says: "Benefits administered by HMRC will rise by 1.7 per cent from April 2025, in line with the increase in CPI in the year to September 2024. This is with the exception of Tax Credits, which will have no rates in the financial year 2025-2026 as all awards will cease at the end of 2024-2025."

The final wave of Migration Notice letters asking people to claim Universal Credit instead of their current benefits started to be sent out in September to 800,000 people on income-related Employment and Support Allowance (ESA), either on its own or with Housing Benefit, and 20,000 people on income-based Jobseeker's Allowance (JSA).

Another 90,000 people who are claiming tax credits with income-related Employment and Support Allowance (ESA) were notified to make the switch between June and September.

By the time Universal Credit is fully rolled out, 7.2 million households are expected to be claiming the benefit, including 2.7 million previously on tax credits, 2.2 million on income-related ESA, 600,000 on income-based JSA, 600,000 on Income Support and 400,000 on Housing Benefit. Figures estimate that 3.8 million (53 per cent of the total) will be better off from the move, 1.2 million (17 per cent) will be on the same amount, and 2.2 million (30 per cent) will be entitled to a lower amount but should get a 'transitional protection' top-up payment to ensure they don't lose out financially.

After tax credits are abolished in April 2025, the only state benefits HMRC will handle are Child Benefit and Guardian's Allowance. All others such as Universal Credit, Personal Independence Payment (PIP), State Pension and Carer's Allowance are dealt with by the Department for Work and Pensions.

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