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# TP calculation

Client works 20 hours per week for £184.61 net. They have a current working tax credit award of £85 per week.

Their earnings are too high for UC if they voluntary migrate.

UC maximum amount under managed migration is £737.07 comprised of £368.74 standard allowance plus £368.33 transitional element (the difference between the monthly legacy amount and the Universal Credit amount - £85 per week converted to a monthly figure).

The client’s monthly wages are £799.98. With the taper applied the countable income is £439.98 giving a UC entitlement of £297.09 per month as opposed to the current amount of £368.33 per month working tax credit. UC will be £71.24 per month lower.

Am I going about this the right way as this client will be worse off on UC?

There’s a special way of working out the TE for claimants who’s Indicative UC Amount is reduced to £nil - reg 55(b) of TP regs - to avoid the situation you described

First - the TE is worked out by looking at the Total Legacy Amount (TLA) and Indicative UC Amount (IUCA) which won’t necessarily be the same as what they’re receiving on TC / their actual UC awards. If the £85 is their actual entitlement (ie not being adjusted for an under / overpayment), then their TLA will be the monthly equivalent. The IUCA will be worked out using the income that HMRC are using to calculate their TC award (so probably the claimant’s income from the last tax year) - the DWP divide the annual figure by 12 and deduct notional amounts for tax and NI if appropriate.

But if we assume that their IUCA is being reduced by an assessable income of £440, their Transitional Element will be their TLA (£368.33) plus the difference between their Maximum IUCA and the assessable income that’s reducing it (£71.26 because £440 - £368.74) giving a TE of £439.59

So, in their first UC award their max UC is £808.33 (£368.74 + £439.59) - when that’s reduced by an assessable income of £440 it leaves an award of £368.33 ie the TLA so they’re not worse off (assuming their income is the same)

Hope that makes sense!

I find it simpler conceptually to allow the indicative UC amount to go below zero when deducting the amounts in respect of income from the maximum amount of UC.

I think it is more intuitive, and it cuts out the extra step actually required by the regs.

There’s a special way of working out the TE for claimants who’s Indicative UC Amount is reduced to £nil - reg 55(b) of TP regs - to avoid the situation you described

First - the TE is worked out by looking at the Total Legacy Amount (TLA) and Indicative UC Amount (IUCA) which won’t necessarily be the same as what they’re receiving on TC / their actual UC awards. If the £85 is their actual entitlement (ie not being adjusted for an under / overpayment), then their TLA will be the monthly equivalent. The IUCA will be worked out using the income that HMRC are using to calculate their TC award (so probably the claimant’s income from the last tax year) - the DWP divide the annual figure by 12 and deduct notional amounts for tax and NI if appropriate.

But if we assume that their IUCA is being reduced by an assessable income of £440, their Transitional Element will be their TLA (£368.33) plus the difference between their Maximum IUCA and the assessable income that’s reducing it (£71.26 because £440 - £368.74) giving a TE of £439.59

So, in their first UC award their max UC is £808.33 (£368.74 + £439.59) - when that’s reduced by an assessable income of £440 it leaves an award of £368.33 ie the TLA so they’re not worse off (assuming their income is the same)

Hope that makes sense!

Crumbs! I was OK up until ‘plus the difference between their maximum IUCA and the assessable income that’s reducing it’. That will take me a while but thank you both very much

Hello

Can I check my understanding?

Cl works for 16.25 hours pw earning £169.32pw gross. He gets PIP ER DL and SR mobility. He has £26k in capital and no housing costs. He was in receipt of WTC of £114.32pw with a disabled worker element.

He has been managed-migrated to UC.

Total legacy amount TLA is £495.38pcm. (£114.32pw).

Earnings after 55% taper £403.54 plus tariff income £174.

Their Indicative UC is being reduced by an assessable income of £403.54 plus £174 = £577.54. Their Transitional Element will be their TLA (£495.38) plus the difference between their Maximum Indicative UC (SA £368.74) and the assessable income that’s reducing it, £208.80 (because £577.54 - £368.74= £208.80) giving a TE of £704.18.

Max UC in first AP is £368.74 plus £704.74= £1072.92. Deduct £403.54 tapered income and £174 tariff income gives UC entitlement of £495.38.

Is this correct?

The mechanics of the TP calculation you have made look correct, but the TLA looks wrong.

I would check what income tax credits are actually using on his award. And if it is a current year estimate, then you also need to know what his income was for tax credits last year. This should all be on his latest tax credit award notice.

Assuming he is also getting the severe disability element of WTC, and that his income has been £169.32/week since at least April 2022, then I would have expected his TLA to be around £582.48.

Thanks Charles. Couldn’t get the reply to send until now!