UK, remember your settings and improve government services. We also use cookies set by other sites to help us deliver content from their services. You can change your cookie settings at any time. How much you get depends on things like your circumstances and income. Use the tax credits calculator to work out how much you could get. You must report these changes to HM Revenue and Customs.
Check what you need to do. To help us improve GOV. TCA , Section 7 3 goes on to explain how to determine relevant income. Where none of the above apply, the claim is based on CYI. In this context, CYI means income for the year for which the award is being calculated whilst PYI refers to income for the year before.
That was probably the most significant of the changes announced in the Pre-Budget Report on 5 December , and the overpayment figures relating to the tax year showed a significant fall in both the number and amount of overpayments. HMRC have attributed this largely to the increased income disregard. The effect of the increase was to bring greater certainty for claimants in a system where a major problem had been the sheer unpredictability of what families could expect to receive. Applying changes to the disregards.
The disregard for income rises has changed more than once since the tax credits system began and HMRC introduced a disregard for falls in income from April There is sometimes confusion about when newly announced disregards should be applied. In simple terms, a new disregard applies to the calculation of all claims for the year it was introduced and later years.
Sanjay receives his renewal papers for the tax year in May This is because the claim being calculated was and the decrease in disregard did not occur until 6 April Any re-calculation of his award, including when HMRC finalised it, will have been done by comparing his income or estimated income if before finalisation against his income.
Each time HMRC calculate tax credit entitlement other than for initial awards at the start of the year it normally requires a comparison between income for the current year and previous year. The effect of this is to create a disregard for rises in income from one year to the next, so that claimants will not face an immediate reduction in their tax credits should they start a higher paid job or increase their income in some other way.
Jason claims tax credits on 6 June Sanjita claims tax credits on 6 April Soon after claiming, she gets a new job with an increased salary. Indeed, HMRC check the CY earnings information on the tax credit claim with the earnings information from RTI data provided by employers and pension providers for tax purposes see section on RTI and tax credits to help avoid overpayments.
It is also important to bear in mind the impact of CY income on overpayment recovery rates. You can read more about recovery of overpayments from ongoing awards in our section on Dealing with overpayment debt. Jason, from example 1, had two choices when he started his second job. As well as encouraging people to update income figures before the end of the year, HMRC have introduced other measures to guard against overpayments generated by provisional payments that reflect outdated income figures.
Where claimants have not provided up-to-date information about their income and circumstances, the income figure used to calculate provisional payments has been up-rated by the average percentage increase in earnings. The final two income tests in TCA , Section 7 apply to falls in income from one year to the next. Prior to the tax year, HMRC did not apply this disregard. Claimants who thought their income might be lower in the current year were able to contact HMRC with an estimated current year income and have their award re-calculated based on that estimate.
This generally meant tax credits would increase. They reported this estimated income to HMRC on 1 July , and their tax credits were adjusted accordingly. Their tax credits increased from 1 July due to the estimated fall in their income. An alternative option open to claimants in this position was to wait until the end of the tax year, allowing their award to continue based on previous year income, and declare their actual lower income for the current year at renewal time.
This would result in an underpayment and the claimant receiving a lump sum of arrears after the end of the tax year because their claim would be reassessed using their lower current year income. When deciding whether to opt for a lump sum or an immediate increase in weekly claimants, the impact on means-tested benefits, such as housing benefit and council tax benefit could be considered.
This disregard is applied to the calculation of any award for and later years. Whilst this is a relatively simple concept where someone only has one fall in income, it can become more complicated as the following examples illustrate:. This is because the award is finalised by comparing CYI to that of the previous year. Jeremy will also have an overpayment as the estimates he gave during the year turned out to be too low.
The situation becomes more complex when the income disregard for falls in income is coupled with the disregard for rises in income over a three year period. My work has reduced due to coronavirus — how does that affect my tax credits?
Change before 30 September What it meant for working tax credit? Reporting changes to HMRC Temporary reduction in hours: For example, you normally worked 32 hours a week but your hours were reduced to 12 hours a week due to the coronavirus crisis. What happens if my working hours are not back to normal by 1 October ? The legislation is complicated but in summary: If your hours have returned to normal from 1 October — you do not need to do anything, your tax credits will continue as usual.
You must continue to report any permanent changes to HMRC as soon as they happen. Example Tariq needs to work at least 16 hours a week to qualify for working tax credit.
You will remain entitled to working tax credit until 25 November. From that date, if your hours have still not returned to the level required for your working tax credit claim, you will receive a 4 week run-on of working tax credit and then it will end see below if you resume your normal hours in the 4-week run-on.
Example Stella and Zeb both need to work at least 16 hours a week to qualify for working tax credit. If you do not expect your hours to return to the level needed to qualify for working tax credit based on your circumstances by 25 November, HMRC treat this as a permanent change and you must tell them as soon as you know about this change.
You will receive a 4 week run-on of working tax credit and then it will end see below if you resume your normal hours in the 4-week run-on. Example Mia needs to work at least 30 hours a week to qualify for working tax credit. You must continue to tell HMRC about any other permanent changes. Example Jenna needs to work at least 16 hours a week to qualify for working tax credit. If you are in a 4 week run-on period and get a new job or increase your hours so that you return to the level needed to qualify for working tax credit, you should contact HMRC immediately and your working tax credit will continue under normal rules.
There are special rules in working tax credit that allow your award to continue during certain periods of leave such as maternity leave or sick leave. If you fall under the second bullet above and enter one of these periods of leave, your working tax credit will continue for as long as you meet the special rules relating to your period of leave.
If you enter a period of leave during one of the 4 week run-on periods entered above, you should contact HMRC. I have been made redundant — how does that affect my tax credits? Some of these payments may already be included in your P60 income figure so you must check carefully. If you have correctly declared your SEISS grant on your tax return, it will already be included in the box 28 figure.
If you are an individual and complete the self-employment full pages — you will usually use the figure in box 73 plus any figure in box 75 for tax credit purposes.
If you have correctly declared your SEISS grant on your tax return, it will already be included in the box 73 figure. If you have correctly declared your SEISS grant on your tax return, it will already be included in the box 16 figure. This will mean your share of it will be taken across to your own partnership tax return supplementary pages as taxable income. Small business grants and hospitality and leisure grants These grants were paid by local authorities. Enhanced statutory sick pay scheme — Wales only This scheme is only available in Wales.
Other coronavirus support payments We have listed below the coronavirus payments that are disregarded as income for tax credit purposes in the legislation. The following coronavirus related payments are not counted as income for tax credit purposes: Payments, in cash or vouchers, in lieu of free school meals. Payments in connection with emergency volunteering leave under the Coronavirus Act Payments from schemes in other parts of the UK for the purpose of providing financial support to people who are required to self-isolate due to coronavirus and cannot work from home are also disregarded as income.
However, these payments are taxable, but not subject to national insurance. Any payment made under the Covid Winter Grant Scheme England or the COVID local support grant in respect of England or any other corresponding scheme in Northern Ireland, Scotland or Wales for the purpose of providing financial support to families and vulnerable individuals to assist with the cost of food and utilities over the same period.
The Covid Winter Grant scheme should not be confused with some winter business grants that were paid by some local authorities. Payments made under the NHS and Social Care Coronavirus Life Assurance Scheme are not counted as income, instead they are capital and so only any interest will potentially count as income for tax credits.
My childcare has changed — will this affect my tax credits? My income has fallen. Can I claim universal credit and tax credits together? See our information in the main part of our website. If you are currently receiving any of the benefits UC is replacing, they will end when you make a UC claim. If their income is too high, you may not qualify for any help. When will I be moved to universal credit?
If you are currently receiving tax credits, the only way you will move to UC outside the formal migration exercise is if: You choose to claim UC — some people are better off on UC compared to tax credits, others are worse off. It is important to seek advice from a welfare rights specialist before making a claim for UC — once you claim UC, your tax credits will end and you are unlikely to be able to reclaim them even if you are not entitled to UC. You need to claim another benefit that UC has replaced — for example if your income has fallen and you need help with your rent.
In that case, most people will need to claim UC which will end your tax credits. You have a change of circumstances which ends your tax credit claim and none of the exceptions apply that would allow you to make a new claim for tax credits. This might happen if you separate from your partner or you move in with a partner or you claim working tax credit only and are made redundant.
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