QUESTION: I have received forms from HMRC that the tax credit renewal deadline is July 31. Can you explain what I need to do to renew my tax credit claim?
ANSWER: There are around five million people in the UK who claim tax credits on an annual basis. Tax credits are based on household circumstances and can be claimed jointly or by singles. Entitlement is based on factors such as age, income, hours worked, number and age of children, childcare costs and disabilities.
Tax credit awards last for a maximum of one tax year (April 6 to following April 5). When you claim, your award is based on your circumstances for the year you claim and your income for the previous tax year.
After the tax year ends, HMRC use a ‘renewals process’ to ask for your actual income and to confirm your circumstances for the tax year just ended. This allows them to finalise your entitlement for the year just ended and to set up your claim for the new tax year.
If you receive any notice from HMRC that asks you to check details, you must check it carefully even if you are no longer receiving tax credits. Otherwise HMRC will finalise entitlement for 2021/22 on the information they hold which may be incorrect. This could lead to an overpayment or underpayment.
In essence you have a three-year rolling programme. The initial claim for 2021/22 was based on circumstances current in 2021/22 and income for 2020/21. The renewal process carried out in summer 2022 finalises the award for 2021/22 by comparing the actual income of 2021/22 with that for 2020/21 to finalise the entitlement for 2021/22 and uses the actual income figure for 2021/22 to set the initial award for 2022/23. The 2022/23 award will then be finalised in the summer of 2023.
Within the renewal pack from HMRC, many people will receive a ‘reply-required’ renewal which consists of:
1 A TC603R auto-renewal form – this form will have a black line on the front of it; or
2 A TC603RR plus TC603D (reply required) or TC603D2 (if HMRC need information for more than one year) his form will have a red line on the front of it, plus guidance notes (TC603R or TC603RD). It is very important that you read these guidance notes, even if you plan to renew online.
Some people will receive just a TC603R auto-renewal form. This will show the circumstances from the tax year just ended and income figures that HMRC hold. It may show a range of income. If your circumstances have not changed and the income information is correct, then you do not need to take any action – your claim will automatically renew. The TC603R also acts as your award notice for the new tax year.
HMRC will decide whether you fit the criteria to be an auto-renewal case. Some awards are not suitable for auto-renewal – for example if you are self-employed, have several sources of income, have reported several changes or if HMRC are aware you have received certain statutory payments. In those cases you are likely to receive a reply-required renewal which means you need to fill in a declaration form.
Universal Credit (UC) is gradually replacing tax credits, and some other social security benefits. Universal credit is now available across the UK and HMRC state that it is no longer possible for anyone to make a brand-new claim for tax credits. Instead, people are expected to claim UC or pension credit if appropriate.
Existing tax credit claimants can continue to renew their tax credits and/or add extra elements to their claim. We understand that existing tax credit claimants will move to either universal credit or pension credit. The move to UC is expected to be complete by the end of 2024.
:: Malachy McLernon (m.mclernon@fpmaab.com) is a partner at FPM Accountants Limited (www.fpmaab.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies
