There are special income eligibility rules for making tax credit claims. The amount and type of income you (and your partner for a joint claim) have will affect how much tax credits you might get. There is a common misconception that the only figure that needs to be provided to HMRC when applying for / renewing a tax credit claim is employment income.

However, any taxable income from savings and investments must also be taken into account. This includes pension income, investment income, property income, foreign income and notional income. If the total of these sources of income is £300 or less the income can be treated as nil. If the calculated result is more than £300, only the excess is taken into account.

Claimants must then add employment income, social security income, student income and any miscellaneous income. Trading income must also be added if applicable. There are a number of allowable deductions such as gross gift aid and pension contributions which can be deducted before arriving at an annual income figure.

Interestingly, there is no mention of capital gains under these rules, so it appears that capital gains do not affect tax credit claims. However, in some limited circumstances where the Income Tax rules treat capital as income, and tax it as such, this income needs to be included under the heading of ‘notional income’. HMRC’s guidance explains that this can happen if, for example, you hold shares in a UK company and the company gives you a stock dividend (new shares) instead of a cash dividend.

Claimants should also remember that Universal Credit will eventually replace tax credits, and some other social security benefits. Existing tax credit claimants are expected to be moved across to universal credit between 2019 and 2023.

Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2018. Claimants who do not renew on-time may have their payments stopped.

HMRC has begun sending tax credits renewal packs to tax credit claimants and is encouraging recipients to renew their tax credits claim online. All packs should be with recipients by 26 June 2018. If you haven’t received one by then you should contact the HMRC tax credits helpline. No renewal pack will be sent to taxpayers until April 2019 if they first claimed tax credits after 6 April 2018.

A renewal is required if the first page of the pack has a red line across it and says, ‘reply now’. Claimants need to notify HMRC where there have been changes to the family size, child care costs, number of hours worked and salary. Details of previous year’s income also need to be completed on the form to allow HMRC to check if the correct tax credits have been paid. Claimants must also inform HMRC of any changes in circumstances not already reported during the year such as new working hours, different childcare costs or changes in pay.

In some areas of the country new claims for tax credits may no longer be possible as the introduction of universal credit is slowly rolled out. Universal credit will eventually replace tax credits, and other social security benefits. Existing tax credit claimants are expected to be moved across to universal credit between 2019 and 2022.

Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2018. Claimants who do not renew on-time may have their payments stopped.

HMRC has started to send tax credits renewal packs to tax credit claimants and is encouraging recipients to renew their tax credits claim online. All packs should be with recipients by the end of June. A renewal is required if the pack has a red line across the first page and it says, ‘reply now’.

Claimants need to notify HMRC where there have been changes to the family size, child care costs, number of hours worked and salary. Details of previous year’s income also need to be completed on the form to allow HMRC to check if the correct tax credits have been paid. Claimants must also inform HMRC of any changes in circumstances not already reported during the year such as new working hours, different childcare costs or changes in pay.

The child tax credit has been designed to help lower income families with children, credits are available to families with low to moderate income. Child tax credit is paid directly to the main carer in the family, either weekly or monthly and is usually paid directly to a designated bank or building society account. The working tax credit assists taxpayers on low incomes by providing top-up payments.

Please note:

In some areas of the country new claims for tax credits may no longer be possible if replaced by the introduction of universal credits. Universal credit will eventually replace tax credits, and other social security benefits. Existing tax credit claimants are expected to be moved across to universal credit between 2019 and 2022.