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Warning: Tax credit claims will not be automatically renewed this year

Joanna Faith
Written By:
Joanna Faith

HMRC automatically renewed almost all tax credit claims last year to relieve pressure on people at the start of the pandemic – but this year is different.

Hundreds of thousands of tax credit claimants, who had their claims auto-renewed last year due to the Covid pandemic, will have to complete and return renewal declaration forms by the end of next month or risk losing their entitlements.

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.

In total, 2.8 million out of 2.95 million renewal packs sent out in 2020 were auto-renewed. This year, 1.7 million out of a forecast 2.5 million are expected to be auto-renewals, according to HMRC.

That means 800,000 people have until 31 July to report any changes that may affect the amount of tax credits they are paid.

Victoria Todd, head of the Low Incomes Tax Reform Group (LITRG), said: “We are concerned that some people may wrongly assume that their tax credits will be renewed automatically this year and that there will be potential confusion about the various Covid-19 payments, whether they count as income for tax credits and how they should be declared.

“Whatever type of renewal pack HMRC send you, make sure you follow the instructions and complete any actions by 31 July 2021. It is especially important this year to check your income carefully and make sure any Covid-19 support payments that you received have been properly declared.”

For example, the bonus payments for health and social care staff, which count as income for tax credits, were paid through the payroll and should be already included in your P60 figure and in the figure shown on your award notice if HMRC have received earnings data from the tax system.

If you are self-employed and have completed your tax return for 2020/21 that already includes Covid-19 grants in your trading income figure, then you should make sure you do not double-count any payments when doing your tax credits renewal.

“If you are unsure about whether a grant or payment should be included as income for tax credits or how to declare it as income – contact HMRC,” Todd said.

HMRC was aiming to send all renewal packs out by 4 June 2021.