HMRC is currently sending the annual tax credit renewal packs to some 2.1 million tax credit claimants and is encouraging recipients to renew their tax credits claim online. HMRC started writing to taxpayers at the end of April and expects all packs to be with recipients by 27 May 2022. 

A renewal is required if the pack has a red line across the first page and it says, 'reply now'. Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2022. Claimants who do not renew on-time may have their payments stopped. Around 630,000 taxpayers are expected to receive these packs and can renew their tax credits via GOV.UK or on HMRC’s app.

If the renewal pack has a black line across the front page and says, ‘check now’ then you will need to check your details are correct. Taxpayers need to notify HMRC where there have been changes to the family size, childcare 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.

Taxpayers are not required to report any temporary falls in their working hours as a result of coronavirus. They will be treated as if they are working their normal hours until the Coronavirus Job Retention Scheme closes.

Universal credit is expected to fully replace tax credits, and other legacy benefits (including Income-Related Employment and Support Allowance, Income-Based Jobseeker’s Allowance) by the end of 2024. HMRC restarted their managed migration process on 9 May 2022. This process was paused during the pandemic. This means that claimants will gradually be notified when required to move to Universal Credit. This process is due to be completed by 2024. Claimants can also elect to move from tax credits to Universal Credit if they would be financially better off. An independent benefits calculator can be used to check.

The 31 July 2021 is the reporting deadline for families and individuals that receive tax credits. By this date they will need to tell HMRC about any changes to their circumstances or income and to renew their tax credit application. As in previous years, there is likely to be a last-minute rush and it may be difficult to contact HMRC by phone. Claims can be renewed by post, phone or online. At the beginning of July, there were still some 440,000 claims that had to be renewed.

Once the deadline has expired, anyone who has not yet renewed their tax credits should still ensure they do so as soon as possible as otherwise their payments may be stopped, and monies received since last April may have to be repaid. We would strongly advise any of our readers still to renew their tax credits to do so as a matter of urgency.

Over 2.5 million renewal packs were sent out by HMRC between late April and early June. A renewal is required if the pack has a red line across the first page and it says, 'reply now'. If the pack has a black line and says ‘check now’, recipients will need to check the details are correct. If the details are correct the tax credit awards will be renewed automatically.

Taxpayers are not required to report any temporary falls in their working hours because of coronavirus. However, other differences that could affect entitlement to tax credit claims such as changes to living arrangements, childcare, working hours, or income (increase or decrease) should be reported to HMRC.

HMRC has begun sending the annual tax credit renewal packs to some 2.5 million tax credit claimants and is encouraging recipients to renew their tax credits claim online. The packs are being sent out over the next 6 weeks and should be with recipients by 4 June 2021. 

A renewal is required if the pack has a red line across the first page and it says, 'reply now'. Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2021. Claimants who do not renew on-time may have their payments stopped. 

If the renewal pack has a black line across the front page and says ‘check now’, then you will need to check your details are correct. Taxpayers 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.

Taxpayers are not required to report any temporary falls in their working hours as a result of coronavirus. They will be treated as if they are working their normal hours until the Coronavirus Job Retention Scheme closes.

Universal credit will eventually replace tax credits, and some other social security benefits. You cannot claim tax credits and Universal Credit at the same time.

As part of the March 2021 Budget, the Chancellor announced that the temporary £20 weekly uplift in Universal Credits would continue for a further six months, until the end of September 2021. It was also confirmed that Working Tax Credit claimants would receive equivalent support. It appears that it was operationally difficult for this support to be delivered on a periodic basis and the government therefore decided to deliver this support via a £500, one-off payment.

The one-off payment provides extra support following the end of the 2020-21 tax year. It is though that more than a million households up and down the country will be eligible for the one-off payment if, on 2 March 2021, they were getting either:

• Working Tax Credit
• Child Tax Credit and were eligible for Working Tax Credit but did not get a payment because their income was too high to get Working Tax Credit payments

There is no requirement to contact HMRC or apply for the payment. 

HMRC will make contact by text message or letter during April to confirm if you are eligible.

If you are eligible, you should get your payment direct to your bank account by 23 April 2021. You will not see the payment on the online tax credit service.

The payment is non-taxable and will not affect your benefits. You do not need to declare it as income on your Self-Assessment tax returns or for tax credit claims and renewals.

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.