Renewing Tax Credits
If you receive tax credits (either Working Tax Credit or Child Tax Credit) then the claim needs to be renewed each year. The renewal is to confirm your income for the 2018/19 tax year, finalising your claim for that year. It also enables your claim to continue into the 2019/20 tax year. The deadline for renewing is 31 July, so you need to check your position now if you haven’t already done so. Miss the deadline and you risk your tax credits payments stopping with any amounts you have received since 5 April 2019 being reclaimed.
If you first claimed after 5 April 2019, then you will not need to renew until next year. If your claim goes back earlier than that, you should have received a renewal pack from HMRC by now. If you have not received this you need to contact the Tax Credits Helpline on 0345 300 3900.
The renewal pack will contain one of the following combinations of documents
• Award Review Letter (TC603R) – This will show the details HMRC already have in connection with your claim. You should check that those details are correct. If they are, you do not need to do anything else as the claim will renew automatically. If they are incorrect, you should supply the correct details before the deadline. If you fail to correct an error then you risk not only losing your tax credits but also having to pay a penalty as well.
• Annual Review Letter (TC603RR) plus one of the following
• Annual Declaration (TC603D) requesting income details for the last tax year or
• Multiple Year Declaration (TC603DD) requesting income details for more than one year
Automatic renewal packs should be marked “check now”. Those requiring a response should be marked “reply now”.
Income to be declared
If you need to fill out an income declaration, then you will need to provide details of the following sources of income
• Employment income – This will normally be found on your year end P60 or payslips
• Employment benefits – If your employer provides non-cash benefits, such as a company car, they should have supplied you with a form P11D showing their value
• Self-employed profits
• Pensions including state pension
• Interest on savings
• Taxable state benefits
• Property rental income
• UK company dividends
• Details of the same types of income for your partner if you are making a joint claim.
The following state benefits are non-taxable and do not need to be included on the form
• Attendance Allowance
• Child Benefit
• Disability Living Allowance
• Housing Benefit
• Personal Independence Payments
Self-employed income for tax credits
The income that should be entered on tax credit forms for the self-employed is the profit that would be shown on their tax return form for the tax year ended 5 April 2019. Since the final deadline for this form is 31 January 2020 it is entirely possible that this figure has not been calculated yet. If you do not have an accurate figure you should include an estimate on your renewal forms. The correct figure should be supplied to HMRC as soon as it is available and by 31 January 2020 at the latest.
If an estimate is too high then your tax credits will be reduced. If an estimate is too low then you will be overpaid and have to pay back some of your tax credits later. It is therefore preferable to calculate the actual figure before renewing your tax credits to avoid problems later.
If a self-employed business has actually made a loss for the year, then this is deducted from other income on your tax credits renewal form. If you are making a joint claim then this deduction can be carried over to your partner’s income if necessary. Any unused loss is carried forward and can be offset against income for tax credits in future years. Gift aid donations and contributions to pension schemes are also deducted from income.
To qualify for this loss relief, the self-employed business must meet the same criteria that permit loss relief for tax purposes. The business must be carried out in a commercial manner with the intention of making a profit. If HMRC consider that a business is a hobby that has no realistic expectation of making a profit then any loss relief will be excluded from the claim.
If the claim is for WTC then you will also need to provide details of hours worked. As, unlike regular employement, self-employment work tends to vary from week to week this calculation can prove tricky. You should calculate a typical average number of hours worked. Make sure you include all activities related to the business, such as bookkeeping and promoting the business. HMRC may later review these working hours against income reported on a tax return to see if the business looks commercial. If the working hours are generating income below the national living wage then they may seek further information.
What if you don’t want to renew your claim?
The tax credits renewal form is a check of your income for the tax credits you received last year as well as a confirmation for the current year. You should therefore still return any forms requiring details of your income to finalise your previous claim.
How to renew your tax credits
There are three main ways of keeping track of your tax credits and making your renewal declarations
• Online – You will need to register for a government gateway account if you do not already have one. Once registered you can login here to get your tax credits information. access.service.gov.uk/login/signin/creds
• By post – Tax credit renewal forms should be sent to Tax Credit Office, HM Revenue and Customs, BX9 1LR
• By telephone – 0345 300 3900 – This number can also be used to update your claim for later changes in your circumstances or to make general enquiries about tax credits.
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