Background
Tax Credits can be a vital lifeline for a number of taxpayers on lower income so a gap in payments, or losing them entirely, could have a big impact. One of the most common reasons for payments to be stopped is not completing the renewal forms in time for the deadline of 31st July.
If a taxpayer is claiming tax credits already, they should have by now automatically have received a renewal pack from HM Revenue & Customs (HMRC). The renewal pack will provide details of whether the taxpayer needs to do anything further in order to renew their tax credits. It is important that where further action is required this is done before the deadline so that payments will continue without a gap. Equally if a taxpayer is expecting a renewal pack and has not yet received one they should contact HMRC as soon as possible.
Detail
The renewal pack a taxpayer receives will detail what if anything they need to do to ensure their tax credits renew.
If the renewal pack has a black line and states ‘check now’ then once the taxpayer has checked their details, if all is correct they will not need to do anything as the tax credits will automatically renew. The renewal pack will set out how much the taxpayer will receive and they may need to show their award notice in order to receive certain benefits. The taxpayer will need to inform HMRC if any details are wrong or there have been any changes to their circumstances, and they should do this before the 31 July 2024.
If the renewal pack has a red line and states ‘reply now’ then the taxpayer will need to respond with the necessary information by the date shown on their renewal pack. For most individuals this will be 31 July 2024. Until they renew, the taxpayer will receive estimated ‘provisional’ payments from 6 April. HMRC may then pay a different amount based on the new information provided from the taxpayers employer or pension provider.
There are a number of ways taxpayers can renew their tax credits or update their details:
- Online – https://www.gov.uk/manage-your-tax-credits or using their personal tax account;
- Using the HMRC app;
- By filling out the form and returning it to HMRC;
- Phoning HMRC tax credits helpline (0345 300 3900).
Our main tip for taxpayers when renewing tax credits is to ensure they read the guidance notes, which come with the renewal pack, carefully. It is common for some income sources to be missed off the claim as they don’t form part of “normal” employment income. These include things like dividends, investment income, interest, rental profits etc.
If a taxpayer’s main source of income is from self-employment, their accounts for the relevant period may not have been prepared and in cases like this, HMRC does allow for an estimate to be included on the renewal claim providing a final figure is given at the earliest opportunity (at the latest 31st January following the deadline).
If a taxpayer misses the deadline for renewing they will be sent a statement. If they contact HMRC within 30 days of the date on the statement their tax credit claim may be restored and they will not have to pay anything back. Contacting HMRC after than the 30 days, will require the taxpayer to explain the reasons for the delay – known as ‘good cause’ – before they consider restoring the claim. If a claim is restored, HMRC will confirm how much a taxpayer will receive within 8 weeks of receiving the renewal.
If the taxpayer does not contact HMRC at all after receiving the statement, their tax credits payments will stop and they will have to pay back the tax credits received since 6 April 2024. If HMRC stops payments, a new claim for tax credits cannot be made.
Finally, it is worth noting that tax credits will end on 5 April 2025 as they are being replaced by Universal Credit. The Department for Work and Pensions (DWP) or the Department for Communities (for Northern Ireland customers) will write to all eligible customers during 2024 and inform them of the need to move to Universal Credit or Pension Credit (if over State Pension age) in order to continue to receive financial support.
If you would like more information or if you require our assistance regarding tax credits, please speak to your usual contact at the firm.
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