How to calculate the transitional element using benefit calculators
A how-to article covering what information is needed when using benefit calculators to support a calculation of the managed migration transitional element
This article is intended to help guide advisers through calculating the transitional element from the figures generated by benefit calculators. We will not be discussing how to use the benefit calculators themselves, but will talk you through what information should be used in the calculation, and what to do with the figures that the calculator generates.
The most accurate way to calculate the transitional element (TE) is by hand. This, however, can be time-intensive and many advisers will be using benefit calculators in advising a client on their entitlement. It is important to be aware that these figures may be inaccurate by a small amount. To be sure of giving correct advice, advisers should have the knowledge to be able to sense-check these calculations, even if they are done on calculators. Advisers are therefore encouraged to be comfortable with the theory of calculating the TE by hand before moving on to using benefits calculators. Citizens Advice advisers can learn how to do this in our Skillbook training on managed migration (training available for internal Citizens Advice only). This article should only be used after the Skillbook training is completed, and we will be using terminology explained in that training. For your reference while reading the article, you can use this glossary to managed migration terminology.
To be able to calculate the entitlement of a client who is moving to UC under managed migration, you need to do three benefit calculations, to find their:
- Total Legacy Amount (TLA);
- Indicative UC (IUC);
- Actual UC (AUC).
In order to get an accurate transitional element, advisers should do a calculation for the total legacy amount, rather than using the amount of legacy benefits the client is actually getting.
Total Legacy Amount
The total legacy amount is the client’s legacy benefit entitlement on migration day¹. As a reminder, migration day is the day before their UC claim if they claim before deadline day, or the day before deadline day if they claim between deadline day and their final deadline². While this amount may be what the client is being paid, there are many reasons why their total legacy amount will not be the same figure as what the client tells you they are getting. Advisers should therefore ensure that they calculate this entitlement independently, rather than just using the amount the client is paid.
To find the total legacy amount, you need to calculate the clients entitlement to Working Tax Credit (WTC), Child Tax Credit (CTC), Housing Benefit, ESA, Income Support, and JSA in relation to their circumstances the day before they claim (or the day before their deadline day).
It is important that you do not calculate the whole total legacy amount in one calculation. This is because the income used to calculate a client’s Tax Credits for their TLA is likely to be different from the income used to calculate a Housing Benefit, ESA, Income Support, or JSA award. You may also need to convert them into a monthly TLA in a different way. You should calculate the TLA in two separate calculations: Tax Credits (Child and Working), then Housing Benefit, ESA, JSA and Income Support.
Income and Capital
To calculate a Tax Credit (TC) amount, use the figure that HMRC will use for the current tax year for the client³. More information on what income is used in a Tax Credit calculation can be found in our Adviser Online article focussing on Tax Credits and Income.
- If the claimant is also getting IS, irESA, or ibJSA, this income should automatically be ignored, and the claimant entitled to their maximum tax credit award⁴.
- If the client has provided an updated figure for the current tax year in-year, use this figure — the calculator should apply the £2,500 disregard from the income figure held for the previous tax year⁵.
- If the current tax year income is different by less than £2,500 to the client’s previous year income, effectively the previous year’s income will be used.
- If it is different by more than £2,500, the first £2,500 of the difference will be disregarded. - If the last income figure the client gave to HMRC was their confirmation of their income at the end of the previous year, HMRC will estimate their income from this. In practise, then, the previous tax year’s figure will be used in calculating the transitional element. If the online calculator asks you for a current year figure, only use this if the client has declared this figure to HMRC.
- Capital is ignored for Tax Credits, so you will not need to include a capital figure. However, if the capital generates actual, taxable, income, then this figure should be included in their income.
When calculating IS, irESA, or ibJSA (Income Support, income-based JSA , or income related ESA), use the income and capital figures that the DWP hold for the relevant week to calculate their DWP benefit⁶.
- If the client is receiving Tax Credits, use the actual Tax Credit amount that the DWP holds for the Tax Credit award and are deducting off their DWP benefits. This may be different to the amount of Tax Credits that you will calculate for the Total Legacy Amount.
Example
Jane is claiming Working Tax Credit and Housing Benefit, as well as PIP standard rate daily living component. In 23/24,Jane was overpaid by £1,229.76 as her income was higher than expected. This is being recovered from her 24/25 award.
Her 24/25 entitlement is £47.24 pw (£204.70 pm), but this is being reduced by 25% to account for her overpayment recovery, so she is actually being paid £35.43 pw (£153.53 pm).
When calculating the representative monthly rate of Jane’s Housing Benefit for the TLA, you need to take into account as income the Tax Credits she’s receiving. Use the actual figure that she’s actually getting: £35.43pw.
However, when calculating the representative monthly rate of Tax Credits for the TLA, you need to calculate a daily rate of TC entitlement, without the overpayment being recovered. This is £204.70- this is the equivalent of £47.24 per week.
When advising Jane, you should make sure to calculate the Housing Benefit award and the Tax Credit award separately, to ensure that this overpayment deduction is taken into account in the representative monthly figure of Housing Benefit but not the representative monthly figure of Tax Credits.
To calculate Housing Benefit, use the income and capital figures that the DWP hold for the relevant week⁷. In practice, this will be the amount that the Local Authority hold and will pass along to DWP. If the claimant is also getting IS, irESA, or ibJSA, this income should automatically be ignored, and the claimant entitled to their maximum Housing Benefit award.
- If the client is receiving Tax Credits, use the actual Tax Credit amount that the Local Authority hold for the Tax Credit award and are deducting off their Housing Benefit. This may be different to the amount of Tax Credits that you will calculate for the Total Legacy Amount.
Elements and Premiums
For all element, premium, and component entitlement, you should enter the claimants information into the benefit calculator as the claimant expects their circumstances to be on Migration Day.
Example
Janis gets a migration notice in May 2024 — they receive Income Support, Child Tax Credit, and Housing Benefit. Janis works a part time job of 10 hours a week and earns £200pw, which DWP are aware of. The figure of £200pw will be used to calculate their Income Support, and their HB and CTC will be automatically their full entitlement without deduction due to income, because they are on IS, irESA, or ibJSA.
Example
Sarah also received a migration notice in May 2024. She is claiming WTC, CTC, and HB. She earns £23,000 (£422pw) this year and £17,000 (£327pw) last year. The year before that, she was earning £15,000 (£288.46). Because she has to keep Housing Benefit updated with her earnings, the local authority are aware that her income is £422pw. The income that is used to calculate her Housing Benefit aspect of the total legacy amount will be £422.
However, Sarah has not yet informed HMRC about her income increase as there is no obligation to tell HMRC about an income change unless it impacts the elements the claimant is entitled to. HMRC will therefore estimate her income based on the previous year, so will use £17,000 for her income on migration day, and will use this figure to calculate her Tax Credit aspect of the total legacy amount.
Sarah could choose to update HMRC with her new income, but this will impact both her total legacy amount and her indicative UC amount (see below), so a better off calculation needs to be completed before she does this.
Reductions to the Total Legacy Amount After Calculator
You should not reduce the total legacy amount to reflect sanctions, overpayments, or third party deductions, even if the client is currently subject to one⁸.
If the claimant is subject to a benefit cap in their legacy amount, this should be included in their Total Legacy Amount. It would be expected that a calculator should do this automatically.
However, if a claimant is not subject to the benefit cap, but their total legacy amount is over the benefit cap and they would be subject to it under Universal Credit, their Total Legacy Amount should be reduced by the benefit cap⁹. This is also the case if the claimant is subject to a benefit cap but it has reduced their HB to nil.
This is likely to need to be done manually after the benefit calculator has provided a figure for their legacy benefit entitlement. You need to reduce their total legacy amount by the benefit cap in the same way you would to a normal UC calculation — ie, their total legacy amount will be reduced by the excess by which their total legacy amount (ignoring childcare costs) is over the “relevant amount” that applies to them. See our Adviser Online article on the benefit cap for more details on how the benefit cap is applied, and who is exempted from the benefits cap.
Example
Bridget is a single parent living in Winchester. She is an owner-occupier and claims Child Tax Credit only, for her 7 children all born before April 2017. Her annual Tax Credit entitlement for 24/25 is £24,743.35.
This is above the 24/25 benefit cap amount of £22,020, but because Bridget is not claiming Housing Benefit, the cap is not imposed on her.
Bridget receives a migration notice, and speaks to a Citizens Advice adviser to find out how this will impact her benefits. Maggie, her adviser, uses a benefit calculator to confirm Bridget’s annual Tax Credit entitlement of £24,743.35. Now that she has found this figure, she needs to impose the benefit cap on this amount, meaning that Bridget’s TLA is actually £22,020 pa / £1,835 pm.
What to do with the figure provided
The legacy benefit entitlement figures provided by the benefit calculator will likely come out of the benefit calculator as a weekly amount. If the client is entitled to a combination of benefits, work out the monthly equivalent by:
- For DWP benefits and Housing Benefit, multiply by 52 and then divide by 12¹⁰
- For Tax Credits, divide by 7 to get the daily amount, then multiply by 365 (even in a leap year), then divide by 12¹¹
Then add the amounts for the individual benefits together¹².
This figure is their total legacy amount, and should be recognisable to the client as roughly how much they are receiving on their legacy benefits. If the amount is significantly different from what they receive, you should explore whether they:
- have a third party deduction or overpayment (including where the overpayment is due to a previous tax year overpayment in Tax Credit) — in which case you need to cater for this deduction in your actual UC calculation. The transitional element will be calculated without this deduction.
- If the claimant has an in-year adjustment on their Tax Credits, due to there being a change of entitlement or income, any under or overpayment that is being adjusted for in their Tax Credit payment on migration day is ignored. It is their circumstances on migration day that matter for the Total Legacy amount. The over or underpayment will be calculated separately using the process set out in our Tax Credits and Income article. - are missing a premium or element that could be added to their benefits. The client should usually make sure to get this added to their benefits before claiming UC, in order to make sure it can be factored into their transitional element and to avoid erosion at a later date. However, you might want to carry out a better off calculation to see what the impact would be of reporting it.
- have reported a different income figure to HMRC for tax credits than you have used. If this is the case, you need to re-do the benefit calculation using the figure that the client has reported to HMRC for the relevant tax year.
Indicative UC
This is a calculation of the client’s UC entitlement on migration day¹³, using mainly the same circumstances as used in their total legacy amount. Generally, then, you should be entering exactly the same details when calculating the IUC as you did for the TLA.
Earned Income — Tax Credits
If the client is entitled to Tax Credits (with or without another legacy benefit also being claimed), the earned income amount should be rooted in the same figure you have used for the tax credit calculation¹⁴, but with two major differences:
- You should not disregard £2,500 if there has been an income change as you will have done for the tax credit income; and
- You should include deductions for tax and national insurance — ie, you need to use their net earnings, rather than gross. Only tax and NI are deducted, not pension contributions.
Example
Graham is on Working Tax Credits and is expecting an earned income of £20,000 this tax year. However, until last month, he was actually expecting to earn £19,000, and this is the latest figure he has provided to HMRC. Last year, he had an earned income figure of £16,000. HMRC therefore used an earned income figure of £16,500 in his Tax Credits calculation, and his Total Legacy Amount also used this amount — due to the £2500 disregard.
When calculating his Indicative UC, the DWP will use the same root figure as HMRC — £19,000 — but do not include the £2500 disregard. They therefore consider his annual earnings to be £19,000, which, after being converted to a monthly amount, would be subject to a deduction for Tax and National Insurance. A figure of £1,422.58 per month would be used.
The earned income should be converted into a monthly amount from an annual amount, by dividing by 12. This is done before the deduction for tax and NI¹⁵.
Aside from these two changes for tax credits, the income figure should be the same as the income used for their legacy benefit calculation. This is especially important for clients who have a fluctuating income or who have had a change of income recently. You should not use their actual, up to date income, as you normally would for a UC calculation, you need to use the same figure as HMRC or DWP hold.
Earned Income — DWP Benefits and Housing Benefit
If the client is not entitled to Tax Credits but is entitled to IS, irESA, or ibJSA (with or without HB), the income figure is the amount that was used as their income for their DWP benefit in the total legacy amount, converted into a monthly amount by multiplying by 52 and dividing by 12¹⁶.
If the client is entitled to Housing Benefit only, the income figure used for their indicative Universal Credit is the amount of earnings that was used to calculate the Housing Benefit part of the total legacy amount, multiplied by 52 and dividing by 12¹⁷.
Unearned Income
The DWP will calculate the claimant’s Indicative UC using information held in the DWP system and the claimants UC claim form. If the DWP have the required information in their internal systems (eg, if the unearned income is a DWP administered benefit), then they will use the information that they hold. If they do not have the required information, what the claimant put on their claim form will be used. If the claimant is only claiming Tax Credits, HMRC will not be able to provide this information to the DWP, so the unearned income declaration on the claimant’s UC claim form will be used¹⁸.
For using a benefit calculator, then, advisers can use the unearned income figure the claimant expects to declare on their UC claim form, generally, in line with UC unearned income rules.
Capital
If the claimant is on Income Support, ESA, JSA, or HB, the DWP will have a declared capital figure and will use this amount to calculate the claimants IUC. Again, this amount should expect to be the same as the client is declaring on their UC claim form.
If the claimant is on Tax Credits only, they will have not provided a capital figure to HMRC. To calculate the IUC, advisers should use the amount the claimant expects to declare on their UC claim form — capped at £16,000. If they have capital over £16,000, only the capital up to £16,000 is considered for the tariff income deduction — a maximum of £174 per assessment period¹⁹.
Elements
The DWP include elements in the claimants IUC in certain conditions. Bear in mind that this may mean that you need to manipulate the benefit calculator you are using, to ensure that the UC amount that is provided includes the elements that the DWP would include in the claimants IUC in their circumstances:
- Child element: If the claimant is getting a child element on CTC, a child element will be included in the IUC²⁰. However, an under 18 is considered a “child” of “Qualifying Young Person” under UC but does not meet the Tax Credits definition of a “child” they could still be included in the IUC — please contact the Expert Advice Team if you have a case regarding this.
- Childcare element: If the claimant is getting a childcare element in their Working Tax Credit, the amount of their childcare element in their IUC will be the same as is provided for in their WTC, as a monthly equivalent (divided by 52 and multiplied by 12)²¹.
- Disabled child element: if the claimant is entitled to a disabled child element on migration day, this should be included in their IUC calculation²².
- Carer element: if the claimant is entitled to a carer element on migration day and will declare this on their UC claim form, a carer element should be included in their IUC calculation²³.
- LCW/LCWRA: if the claimant has a determination of LCW or LCWRA under income related- or contributory-ESA, or National Insurance credits for LCW (otherwise known as credits only-ESA) this will be included in their IUC²⁴.
- Housing Cost Element: if a claimant is getting Housing Benefit, their eligible housing costs will be taken from their Housing Benefit entitlement. If the claimant does not claim Housing Benefit, the DWP have stated that they will not include an HCE in their IUC²⁵.
Reductions to the Indicative UC After Calculator
If the claimant would be subject to the benefit cap under UC and their IUC is higher than the relevant amount, the IUC should be reduced by the benefit cap as normal.
You should not reduce the client’s indicative UC reflect sanctions, overpayments, or third party deductions, even if the client is currently subject to one²⁶.
Example
Maggie has worked out that Bridget (from the above example) has a Total Legacy Amount of £1,835pm, due to the benefit cap being artificially imposed on her CTC. Maggie then works out that Bridget’s IUC would be £2644.99 before the benefit cap. Because Bridget is not exempt from the cap, her UC would be reduced to the amount of the cap, which is £1835.
As her IUC is exactly the same as her TLA, Bridget will not get a Transitional Element — despite the fact that in reality, she will be receiving £226.95pm less on UC than she was on her Tax Credits.
What to do with the figure provided
This figure should be given as a monthly figure from the benefits calculator — if it is not, you should convert it to one at this point.
Transitional element
This part of the calculation needs to be done manually.
You should have a monthly total legacy amount and a monthly indicative UC amount — now you need to find the difference between these figures. This is their transitional element²⁷.
Example
Francesca and Lewis are in receipt of irESA, getting the personal allowance and support group, with no extra premiums. They have no other income and own their home, so their Total Legacy Amount is £823.12 pm.
Under their Indicative UC, they would be entitled to the standard allowance and LCWRA, which is £1,033.79 pm.
The adviser deducts their IUC (£1,033.79) from their TLA (£823.12) and gets £-210.67. Because their Indicative UC is higher than their Total Legacy Amount, there is no Transitional Element, because there is no loss to compensate them for.
Example
James is in receipt of irESA, Housing Benefit, and PIP. James gets a migration notice and is seeking advice on claiming Universal Credit. He is unsure of how much benefit he is entitled to, because his Housing Benefit is paid directly to his landlord.
The Help to Claim adviser he speaks to works out his TLA on a calculator, by finding out he is entitled to the standard allowance, support group component, SDP, and EDP on his ESA. He has no income, so his representative monthly rate of ESA is £1042.38.
The adviser finds out how much his rent is from his tenancy agreement and checks that there are no non-dependant deductions nor is the amount capped due to the local housing allowance. His Housing Benefit therefore covers his whole rent of £500pm.
The adviser adds together the two legacy amount figures they have worked out, to get to a total legacy amount of £1542.38.
The adviser then works out James’s IUC on a calculator, to include a standard allowance, LCWRA, and Housing Cost Element. This amounts to £1309.64.
The adviser then takes the TLA (£1542.38) and IUC (£1309.64) amounts they have worked out, and finds how much more James was entitled to on his legacy benefits: £232.74. This will be his Transitional Element.
If the client has a nil award in their indicative UC, then you need to work out by how much their income exceeds their maximum amount. This figure is added to their total legacy amount to find their transitional element²⁸.
Example
Ali and Tariq are a mixed age couple on Jobseeker’s Allowance only. Ali has an occupational pension of £800 per month, and they have no other income. Their Total Legacy amount is therefore £641.70. Their Universal Credit maximum entitlement is the standard allowance of £617.60 only, with an income deduction of £800. They therefore have a nil UC award.
To calculate Ali and Tariq’s transitional element, their adviser deducts the £800 from the £617.70 to get a figure of £-182.40. £182.40 is then added to their TLA of £641.70, to get a transitional element of £824.10.
Actual UC
Finally, you need to run a normal Universal Credit calculation based on the client’s actual circumstances at the time of claim. However, you need to add the transitional element you have just calculated into the clients maximum UC, like any other element — ie, before any income deductions²⁹.
Example
Ali and Tariq’s, from the above example, actual UC would be worked out by adding their transitional element to the other elements they are entitled to — in their case, just the standard allowance. This creates a maximum UC of £1441.70 (£800 TE + £617.60 SA). They then have their income deducted — in their case, Ali’s pension of £800. This reduces their UC entitlement to £641.70. This is their actual UC entitlement.
If your benefits calculator does not let you add a free-type transitional element amount, you will have to do this final UC calculation manually to ensure the transitional element is added in at the correct time.
Now that the transitional element has been added to the clients UC award, in most cases you should find that their entitlement is exactly the same as their total legacy amount, which is the intention of transitional protection. This provides an easy way to double check your calculation is correct: if the actual UC and total legacy amounts are not the same, something may well have gone wrong.
However, the figures will not be identical if there is an income difference between what is used in the calculation of the transitional element, and the actual UC amount. This will happen if the income used for the transitional element is not the same as the claimants actual earnings in the first month of UC. The actual UC and total legacy amount will also not be identical if there are other changes between the claimants’ circumstances assumed in the transitional element calculation and their actual UC claim — such as childcare costs or eligibility for an element. In these cases, the client will find that their actual UC is likely not to reflect their legacy benefit entitlement and may find themselves worse off.
If the client is subject to a sanction, you should deduct this from their actual UC amount to be able to more accurately tell them what their entitlement is at the point of claim.
Abi Sheridan a Senior Benefits Expert (HTC) in the Expert Advice team at Citizens Advice. Josh Gilbert and Laura Docherty, both Benefits Experts in the Expert Advice Team, supported in the writing of this article.
The information in this article is correct as of the date of publication.
Unfortunately, we are unable to respond to comments left on the medium site — please contact expertadvicesupport@citizensadvice.org.uk if you wish to give feedback on an article.
References
- Regulation 53(1) Universal Credit (Transitional Provisions) Regulation 2014
- Reg 49 UC (TP) Regs 2014
- Regs 53(2) and (3) UC (TP) Regs 2014; Regs 6–9 Tax Credits (Income Thresholds and Determination of Rates) Regulations 2002
- Section 7(2) Tax Credits Act 2002; Reg 4 TC(ITDR) Regs 2002
- s7(3) TC Act 2002; Reg 5 TC(ITDR) Regs 2002
- Reg 53(4) UC (TP) Regs 2014
- Reg 53(7) UC (TP) Regs 2014
- Regs 53(3)(b), (5), and (7) UC (TP) Regs 2014
- Reg 53(11) UC (TP) Regs 2014
- Regs 53(7)(a) and (4)(b) UC (TP) Regs 2014
- Reg 53(3)(a) UC (TP) Regs 2014
- Reg 53(1) UC (TP) Regs 2014
- Reg 54(1) UC (TP) Regs 2014
- Reg 54(2)(c )(i) UC (TP) Regs 2014
- Reg 54(2)(c )(i) UC (TP) Regs 2014
- Reg 54(2)(c )(ii) UC (TP) Regs 2014
- Reg 54(2)(c )(iii) UC (TP) Regs 2014
- See our table on Sources of Information for Calculating the TE; stakeholder response from DWP on how they calculate the TE
- See our table on Sources of Information for Calculating the TE; stakeholder response from DWP on how they calculate the TE
- Reg 54(2)(a) UC (TP) Regs 2014
- Reg 54(2)(b) UC (TP) Regs 2014
- See our table on Sources of Information for Calculating the TE; stakeholder response from DWP on how they calculate the TE
- See our table on Sources of Information for Calculating the TE; stakeholder response from DWP on how they calculate the TE
- See our table on Sources of Information for Calculating the TE; stakeholder response from DWP on how they calculate the TE
- See our table on Sources of Information for Calculating the TE; stakeholder response from DWP on how they calculate the TE
- Reg 54(5) UC (TP) Regs 2014
- Reg 55(1)(a) UC (TP) Regs 2014
- Reg 55(1)(b) UC (TP) Regs 2014
- Reg 52 UC (TP) Regs 2014
