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Transitional element

An overview
The general idea is, a transitional element should be included in your Universal Credit (UC) to ensure that you are not worse off at the point of claiming UC under managed migration.

The transitional element cannot be included if you were claiming legacy benefits as a joint claim and claim UC as a single claimant, or if you claimed legacy benefits as a single claim and claim UC as a joint claimant. Transitional capital and student disregard can still apply.

 

Simplified version

They would take into account the amount you get in current legacy benefits:

  • Child Tax Credits (CTC)

  • Working Tax Credits (WTC)

  • Income-based Jobseekers Allowance (IB-JSA)

  • Income-related Employment and Support Allowance (IR-ESA)

  • Income Support (IS)

  • Housing Benefit (HB)

They would only take into account any benefits that you have a valid claim for at the point of your UC claim starting. 

If your UC entitlement is the same or more than your legacy amount, UC would not include a transitional element. 
If your UC entitlement is less than your legacy amount, UC would include a transitional element to ensure you are not worse off.

NOTE: This is an oversimplified interpretation of how it is calculated. How DWP calculate the legacy and UC entitlement is more complicated than this and can result in different outcomes. Read on to learn more.  

Detailed version

The way in which DWP calculate transitional element is set out in law and based on information that HMRC and DWP hold about you. There are also some assumptions made as well.
 

Firstly they would calculate how much your 'total legacy amount' is.

Your total legacy amount is the representative amounts of any benefits you are entitled to and is based on circumstances on the day before your claim for UC starts. 

  • Child Tax Credits (CTC)

  • Working Tax Credits (WTC)

  • Income-based Jobseekers Allowance (IB-JSA)

  • Income-related Employment and Support Allowance (IR-ESA)

  • Income Support (IS)

  • Housing Benefit (HB)

They would only take into account any benefits that you have a valid claim for at the point of your UC claim starting. The calculation would be done to give a monthly sum of total legacy amount. They use the information that HMRC and DWP hold about you based on the day before your UC claim starts. The result may not be necessarily the same amount in which you receive in legacy benefits due to the method and consideration of the benefit cap, even if you are not in receipt of housing benefit. 

Then they would consider how much your 'indicative UC amount' is the amount you would be entitled to based on the day before your claim for UC starts. It is based on some assumptions set out in law. The earned income figure used in this calculation is the same earnings factored into the total legacy amount above. This may not be the same earnings that you have in your first UC monthly assessment period. The information used for this calculation is the same information that is used in calculation of the total legacy amount supplemented by further information and evidence that DWP sees fit.
When working out the UC indicative amount, any
Transitional Severe Disability Premium (SDP) element is not factored in. 
The benefit cap would be considered, and an exemption would only be applied if you meet the exemption rules for benefit cap on UC. 

If your UC indicative amount is the same or higher than the total legacy amount, there will be no transitional element included in your payments. 

Example: UC indicative amount is £500. Total legacy amount is £300. Total legacy amount is less than UC indicative amount, therefore no transitional element is included.

EXCEPTION: If you meet the criteria for Transitional Severe Disability Premium (SDP) element, this can be included as a transitional element.
Click here to read more.

 

If your UC indicative amount is lower than your total legacy amount, there will be a transitional element included in your payments.

If your UC indicative amount is more than nil, the transitional element amount would be the difference between the total legacy amount and indicative UC amount.

Example: UC indicative amount is £100. Total legacy amount is £250. The total legacy amount is more than the UC indicative amount, therefore a transitional element is included. The actual amount of transitional element required to bring UC indicative amount up to £200 is £300, therefore a transitional element of £300 is included.


If your UC indicative amount is nil, the transitional element amount will be the amount required to bring UC 

Example: UC indicative amount is £0. Total legacy amount is £200. The total legacy amount is more than the UC indicative amount, therefore a transitional element is included. The actual amount of transitional element required to bring UC indicative amount up to £200 is £300, therefore a transitional element of £300 is included.

EXCEPTION: A transitional element cannot be included if your UC indicative amount was calculated using the benefit cap. 

Next, your transitional element is factored into your first UC monthly statement as an element within your full entitlement. Your payment takes into consideration your circumstances on the last day of your first monthly assessment period, and a deduction is made for income received during that period. This amount may be different to what you received in legacy benefits, depending on your specific circumstances. It will be different if your actual earnings are different from what was used in the calculation of total legacy amount and indicative UC amount. 

Specific examples of situations this is most likely to happen.

  • HMRC usually work out tax credits entitlement taking into account last year's earnings unless the earnings had changed by more than £2,500. This could mean your tax credits are being worked out with earnings that are not reflective of what you are earning now. Your UC claim would be worked out based on real time earnings. 

  • People on working tax credits are automatically exempt to the benefit cap. On UC, the equivalent of this would be the exemption to the benefit cap due to earning at least 16 x national minimum wage. Some people on working tax credits do not earn that much, mostly self-employed people. Therefore, their UC indicative amount may have the benefit cap applied to it and the transitional element cannot raise someone's indicative UC amount above the benefit cap. 

  • If you were claiming tax credits and self-employed, the total legacy amount and UC indicative amount are calculated using the earnings information that HMRC hold for you. The earnings amount that HMRC hold for you may be quite modest due to the level of expenses that HMRC allows you to report. HMRC also allows for you to 'leave money in the business' and only report the earnings that you take out of the business. Your transitional element will be calculated based on that information. When it comes to your ongoing UC claim, you would be expected to report monthly all the money that comes into the business and the permitted expenses allowed by UC. This could mean that the earnings on your ongoing UC claim are significantly higher than previously, resulting in a much lower UC award. 

  • If you are claiming IR-ESA and conducting permitted work, the amount of earnings that IR-ESA are taking into account is nil. Your total legacy amount and indicative UC amount would be calculated based on nil earnings. UC does not have a permitted earnings rule and any earnings above your work allowance will cause a deduction to your ongoing UC payments which could result in a much lower UC award. 

01

Calculate 'total legacy amount' and convert to monthly amount.

02

Calculate 'indicative UC amount' based on the same information used in 'total legacy amount'.

03

If 'indicative UC amount' is lower than 'total legacy amount', transitional element will be the difference.

If 'indicative UC amount' is the same or more than 'total legacy amount', there will be no transitional element. 

04

When you receive your first statement transitional element will be an additional element and your statement will be based on your current circusmstances and income. 

Transitional element erosion
The transitional element is only intended to be temporary and if you are awarded a new element, or another element increases, your transitional element will erode. The childcare element does not change the transitional element.
Example 1: You have a transitional element of £120. Your housing element increases by £50 due to a rent increase. Your transitional element will decrease by £50 to £70. Your UC amount remains the same overall, but you do have to pay £50 more in rent. 
Example 2: You have a transitional element of £500. You have your first child and child element of £287.92 is added to your statement. Your transitional element will decrease by £287.92 to £212.08. Your UC amount remains the same overall, but you do have a child now. 
Example 3: You have a transitional element of £300. You start paying eligible childcare and have childcare element of £200 included in your UC award for the first time. Your transitional element remains at £300 as childcare element does not have an effect on transitional element. 

Your transitional element amount is not eroded or effected by any changes during your first monthly assessment period on UC. It is also only eroded by new or increase in elements (except childcare element), therefore a change in income does not erode the transitional element. This is because a change of income would just be a change of deduction - not an increase in an element. 

Every April/May when the benefits have their annual uprating is an increase in UC elements. This will cause erosion to transitional element. This means anyone with transitional element will not feel the benefit of annual uprating until they still have transitional element. 

If you have a transitional element and your claim closes due to earnings or income zeroing your entitlement, if you make your re-claim within 3 months, you can continue your transitional element.

Transitional element ending

There are some situations that transitional element will end completely. 

More details can be found clicking here.

Challenging transitional element

If you believe that your transitional element is wrong, you can challenge UC by way of mandatory reconsideration and appeal. It might be helpful to ask UC for a breakdown of how they have calculated the transitional element so you can try to identify what the error is. 
If you need help doing this, you can join our community and ask for help. 

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