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Two days left to renew tax credits

Written by: Emma Lunn
Tax credits claimants are urged to renew their applications ahead of the 31 July deadline, or risk having payments stopped.

Tax credits customers need to tell HMRC about any changes in their circumstances or income by Saturday 31 July 2021.

Tax credits help working families with targeted financial support. Unlike other benefits, tax credits usually have to be renewed each year as the amount of money received depends on how much money was earned in the previous year.

Not everyone has to renew their tax credits every year – but if you are required to and you fail to respond to HMRC on time, you could receive incorrect payments, have payments stopped altogether, or may have to pay back any overpayments, as well as a penalty.

The tax credits renewals process finalises tax credit awards for the tax year that has just ended (2020/21) and it acts as a claim for the current tax year (2021/22).

Claimants who do not yet know their actual income for 2020/21 must still submit an estimate of their income by 31 July – and they need to contact HMRC again by 31 January 2022 to either confirm the estimate is correct or replace it with the actual figures.

Even if someone did not receive any payments during 2020/21, or they have since stopped their claim, if they claimed tax credits at all during the 2020/21 tax year, they will receive papers from HMRC. They must follow HMRC’s instructions to finalise their claim for 2020/21 and, if necessary, make a claim for the current tax year.

For people who had their tax credits claim stopped and who went on to claim universal credit during 2020/21, HMRC should have already finalised the 2020/21 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 2020/21 and the other to finalise the claim for the current year 2021/22.

Victoria Todd, head of the Low Incomes Tax Reform Group (LITRG), said: “Anyone who has not received their tax credits renewal pack by now should contact HMRC to chase it up.

“Missing the deadline means 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.”

“It is important to read the guidance notes carefully, particularly the parts that explain what counts as income for tax credits. For example, some coronavirus support payments need to be included as income for tax credit purposes, others do not.”

Some of the renewal documents will show income figures that HMRC have obtained from employers through the tax system, but these may not include the deductions that are allowable for tax credit purposes.

For example, during 2020/21, many more people were working from home and able to take advantage of tax relief for home working expenses. This expense is deductible from employment income for tax credit purposes, but it will not usually show in the figures HMRC replay in the renewal paperwork.

Todd said: “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 ensure they enter their income figure after any allowable deductions and follow carefully the notes that come with the paper pack. Claimants who have already renewed have until 31 July to give HMRC an updated income figure for 2020/21 if they have missed off any deductions or have made any mistake, such as forgetting to include certain coronavirus support payments.”

People can renew tax credits 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.

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