People who claimed tax credits during 2017/18 and who have received renewal forms from HMRC, must act by July 31 so that their payments do not stop, advises the Low Incomes Tax Reform Group (LITRG).
The tax credits renewals process does two things: it finalises tax credit awards for the tax year that has just ended (2017/18) and it acts as a claim for the current tax year (2018/19).
Claimants who do not yet know their actual income for 2017/18 must still submit an estimate of their income by July 31 and they need to contact HMRC again by 31 January 2019 to either confirm the estimate is correct or replace it with the actual figures.
Even if someone did not receive any payments during 2017/18, or they have since stopped their claim, if they claimed tax credits at all during the 2017/18 tax year, they will receive papers; they should then follow HMRC’s instructions to finalise their claim for 2017/18 and, if necessary, make a claim for the current tax year (2018/19).
For people who had their tax credits claim stopped and who went on to claim universal credit during 2017/18, HMRC should have already finalised the 2017/18 claim and so no renewal pack should be issued. People who claim universal credit during this renewals period may find they have two packs to complete: one to finalise the claim for 2017/18 and the other to finalise the claim for the current year (2018/19).1
LITRG Chair Anne Fairpo said:
“Anyone who has not received their renewal pack by now should contact HMRC to chase it up.
“They must then check carefully the details on the renewal forms and follow the instructions to make their declaration by July 31 if required.
“If you miss the deadline, you could find yourself having to repay to HMRC all of the tax credits you have received since the start of this tax year in April.”2
Some claimants will receive two forms (one with a red line across it) with accompanying guidance notes. These are known as ‘reply-required’ renewals and the claimant must respond to HMRC by July 31. Other claimants will receive just one form (with a black line across it) and these people (known as ‘auto-renewals’) will have their claim for 2017/18 automatically finalised and renewed for 2018/19 using the details HMRC already hold. However, they must still contact HMRC if something on the form is wrong or they have had a change of circumstances.
Anne Fairpo said:
“Whether you are required to reply or are an auto-renewal, it is important you take any action necessary as soon as possible so that HMRC know how much to pay you for the rest of the year. Even if you are no longer entitled to tax credits, if you have received a renewal pack from HMRC you must still follow the instructions in it so HMRC can finalise your 2017/18 claim.”
Tax credits can be renewed online, via the HMRC App, by telephone or through the post. HMRC’s on-line service is found on the official GOV.UK website, either via their personal account (if they have set one up) or by going directly to the ‘Manage your tax credits’ service.3
Unfortunately, this time of the year sometimes sees an increase in fraudulent activity which often targets the most vulnerable taxpayers. Claimants should remember that tax credits can only be renewed using the official HMRC phone number, GOV.UK website, the HMRC app or by post to HMRC’s Tax Credit Office.
Anne Fairpo said:
“It is important to read the guidance notes carefully, particularly the parts that explain what counts as income for tax credits. Some of the renewal documents will show income figures that HMRC have obtained from their tax system but these may not include the deductions that are allowable for tax credit purposes. People should read the notes carefully to see if any of these deductions apply to them. If using the online system to renew, claimants should make sure they enter their income figure after any allowable deductions and carefully follow the notes that come with the paper pack.”4
- When a tax credit award ends and universal credit is claimed in the same tax year, HMRC use a different process to finalise the tax credit claim. This process is called in-year finalisation and means that HMRC finalise the tax credit claim for the current year soon after it has ended rather waiting until after the following April. Where someone claims universal credit during the renewals period, they are likely to receive more than one pack and so they need to check the details of each pack carefully paying particular attention to which year HMRC are requesting income information about. Calculating income under the in-year finalisation process is done differently, in some cases, compared to the current process so claimants should read the guidance notes that come with each form carefully.
- Once the July 31 deadline passes, if a claimant has not renewed their claim, HMRC stop payments and issue a Statement of Account. If the claimant contacts HMRC within 30 days of the date on the Statement of Account, the renewal claim can be reinstated from April 6 2018. If they do not, then all payments made from April 6 will have to be paid back to HMRC and the claimant will need to make a fresh claim for tax credits – not a renewal claim –- that can generally only be backdated up to 31 days. As universal credit is gradually replacing tax credits and other legacy benefits, in areas where the universal credit full service is available most people can no longer make a fresh claim for tax credits, although there are some exceptions. If the claimant can show HMRC they have good cause for missing the July 31 deadline and replies by January 31 2019, then they may be able to have their tax credit claim renewed and reinstated from April 6 2018.
- Further information on renewing tax credits (including the requirements for doing so) and how the process for the renewal can be started can be found on GOV.UK. HMRC can be contacted either using the official HMRC online service via the GOV.UK website or the official phone number – 0345 300 3900. The HMRC App is free and can be downloaded from the App Store or Google Play store. More information on the renewals process generally can be found on the LITRG website.
- Employers and pension providers send data about earnings and pensions to HMRC for income tax and national insurance purposes throughout the year via the Real Time Information (RTI) system. HMRC sometimes use this data in the tax credit renewals process. For those who receive auto-renewals, this data will be used to finalise the 2017/18 claim and renew the claim for 2018/19 unless the claimant tells HMRC that the figures are incorrect or that they have deductions to be made from those figures. For reply-required renewals, the data will be shown on the form as a guideline, but claimants are still required to fill in their actual income figures for 2017/18 on the declaration form. They should check the notes that are sent with the renewal pack carefully to ensure they have used the correct income figure and made any allowable deductions from their income figure. See GOV.UK.