QUESTION: I have received forms from HMRC stating that the tax credit renewal deadline is July 31. My circumstances have changed since last year and I’m not sure I’m still entitled, should I still complete?
ANSWER: Entitlement to tax credits is based on factors such as age, income, hours worked, number and age of children, childcare costs, and disabilities of your household. It can be made as a joint claimant or as a single claimant.
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. So even if you do not intend to make a claim for the current tax year you should complete the renewals process to finalise your entitlement for 2022/23. Otherwise, HMRC will finalise 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 2022/23 was based on your circumstances in 2022/23 and income for 2021/22. The renewal process carried out in summer 2023 finalises the award for 2022/23 by updating your 2021/22 income with your actual income of 2022/23. It also sets your initial award for 2023/24 based on your current circumstances and your income figure for 2022/23. The 2023/24 award will then be finalised in the summer of 2024.
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.
It is no longer possible for anyone to make a brand-new claim for tax credits, instead people are expected to claim Universal Credit or pension credit if appropriate. By the end of 2024, tax credits for existing claimants will also be replaced with Universal Credit.
Those who currently receive tax credits will receive a letter from the Department for Work and Pensions (DWP) telling them when to claim Universal Credit. It is important that a claim is made by the deadline shown in the letter to continue receiving financial support as tax credits will end even if a claim for Universal Credit is not made.
:: KellyAnne Murtagh (k.murtagh@fpmaab.com) is senior tax manager at FPM Accountants Ltd (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.
