LITRG draws attention to some topical issues including student tax, self assessment tax returns and tax payments, tax credits renewals and child trust fund changes.
Introduction
With press coverage of recent Budget measures and continued attention on further tax changes, tightening of public services budgets and review of benefits, you might be confused about what you need to think about now. As part of our monthly series of reminder articles, we therefore focus on some topical issues under four main headings:
- Students
- Tax return or tax payment troubles?
- Tax credits
- Benefits
In some cases below, we advise you to contact HMRC. When doing so, make sure if you telephone them you keep a careful note of your conversation.
Students
Leaving school, college or university?
Exam results are coming up and you may be considering what to do next. For those entering the world of work, either from school or university, times are tough. Our June article (see useful links below) gave some tips on things to consider which could be of help, including:
- working on an employed or self-employed basis;
- making sure you are paying the right tax; and
- checking if you are entitled to tax credits.
Might you be due a tax refund?
Students’ working patterns can often lead to paying too much tax on their wages. Our article – ‘The practicalities of claiming a tax refund’ (see useful links below) explains more.
Staying on at school?
16 to 19 year-olds considering staying on at school should check their entitlement to Education Maintenance Allowance (‘EMA’) which can pay you up to £30 a week depending on household income. Check the rules, however, as they vary depending on which part of the UK you are studying in.
Going to college or university?
If you are going on to college or university, make sure you review your student finance options.
Working in the summer holidays?
Remember, students working only in vacations who meet certain criteria may be able to fill in a P38(S) so that their employer can pay them without deducting tax.
Coming to the UK to study?
For international students coming to study in the UK, HMRC provide a short guide to help explain the potential tax issues.
Tax return or tax payment troubles?
Our July article (see useful links below) reminded of some key self assessment deadlines. If you missed one or more of these, you could receive a penalty; but all might not be lost – you might be able to appeal to HMRC (and, if necessary, to an independent tribunal).
Appealing against a penalty for a late 2008/09 tax return
If you still haven’t sent in your tax return for 2008/09, you are likely to get a second fixed £100 penalty from HMRC this month. If you think that the penalty notice was issued in error (for example, you did file the return by 31 July so you think should not be due to pay a second penalty), make sure you lodge an appeal within 30 days of the notice.
Even if you did not meet the deadline you may have a reasonable excuse for late filing, which means you can appeal against the penalty.
Late tax return penalties where you owed less than £100 at 31 January 2010
Under current rules, the £100 fixed penalty should also be reduced to nil if you had paid all the tax due for 2008/09 by 31 January 2010 or had no tax to pay. If you owed less than £100 at that date, the penalty is limited to the amount you owed (eg if you owed £50, the maximum penalty is £50).
Missed the 30-day appeal deadline?
Late appeals against penalties may be accepted if you have a reasonable excuse for not meeting the 30-day deadline (and the independent tribunal might still consider a late appeal even if HMRC refuse to accept it).
Late payment penalties – 5% surcharges
If you still owed tax for 2008/09 as at 31 July 2010, you could also be charged a second 5% surcharge for late payment – so for every £100 you owed at that date, you will be charged an extra £5 on top. Again, the notice of the penalty is likely to come through some time soon. Similar rights of appeal apply as for late filing penalties and again, you must lodge your appeal within 30 days of the date on the notice.
Second payment on account 2009/10
If you are in self assessment and are due to make payments on account, the second of these for 2009/10 should have been paid by 31 July. If your circumstances have changed, you might want to consider whether you can claim to reduce 2009/10 payments on account.
You can still claim to reduce your payments even if you have already paid the 31 July instalment, and ask HMRC to refund the amount you believe you have overpaid. Note, however, that you must genuinely think you will owe less overall for the 2009/10 tax year than for 2008/09 (on which the payments are based).
Having difficulty paying?
If you are having trouble paying what you owe, make sure you contact HMRC as soon as possible, as you may be able to negotiate extra time to pay.
If HMRC agree to spread your payments, you will still pay interest, although penalties potentially arising from the date of the agreement should be suspended provided you stick to the payment plan (or contact HMRC again promptly to renegotiate if you need further help).
Tax credits
In a recent article (see useful links below) we explained the tax credit ‘renewals’ process (a misnomer given that you have to complete the process even if you no longer wish to claim tax credits!). That article also gives information about providing an estimate of your income if you do not yet have final details for last year so long as you either confirm the estimate, or file accurate figures, by 31 January 2011.
Renewals - missed the 31 July deadline?
If you have now missed the 31 July deadline, you are likely to receive from HMRC a ‘statement of account’ telling you that they have stopped your payments. In addition, HMRC are likely to ask for all of the tax credits paid since the start of the tax year in April to be repaid to them. If you contact HMRC within 30 days of receiving this document, HMRC will process the renewal and reinstate your 2010/11 claim back to April.
If you miss that further 30-day grace period, you can only renew and secure your entitlement for the whole of 2010/11, if you:
- have ‘good cause’ for your failure to renew so far, and
- complete your renewal by 31 January 2011.
If good cause doesn’t apply, HMRC will ask you to repay all payments made to you from the start of the tax year, and you will need to make a new claim for tax credits which can only be backdated 93 days.
If you have missed the deadline, contact HMRC as soon as possible. Telephone the Tax Credits helpline on 0845 300 3900 (Textphone 0845 300 3909).
Did you fail to complete your tax credit renewal because you no longer wish to claim?
Once in the tax credit system, it is notoriously difficult to get out again without incurring an overpayment. Some people decide that they no longer wish to claim tax credits, and often don’t complete their ‘renewal’ forms as they don’t wish to claim. One of the problems with this is that any payments made since April become overpaid.
In April 2010, HMRC introduced new rules that allow claimants to withdraw from the system by finalising their claim for the year just ended without the need to make a new claim for the current tax year. However, the details of how this works in practice are not yet known.
We urge anyone who wishes to withdraw from the system to seek advice (for example from an advice agency such as Citizens advice or local authority welfare rights). Withdrawing now is likely to mean that there will be an overpayment of tax credits since April which HMRC will demand be repaid.
School's out - check your tax credits
The school year has just ended and unfortunately for parents, the holidays can bring with them tax credit changes. Our recent article provides guidance in two key areas where your tax credits claim could be affected:
- Childcare costs in the school holidays; and
- What happens when your children leave school.
Make sure you check your situation so that you claim all you are entitled to, or avoid being paid too much and having to pay it back later.
Benefits
Child Trust Fund
As recently announced, payments into Child Trust Funds are to be gradually phased out. The transition begins on 1 August, with children born from then to December 2010 receiving a £50 voucher (and a £50 additional payment if they are on a low income). Both these payments were previously set at £250.
Useful links
Telephoning HMRC? Keep a careful note
June tax and benefits reminders
The practicalities of claiming a tax refund
Directgov information on Education Maintenance Allowance
LITRG guidance on the P38(S) process for students
July deadlines not to be missed!
LITRG guidance on appeals and reasonable excuse
LITRG information on self assessment payments on account
HMRC guidance if you can’t pay your tax and further guidance on the TaxAid website.
LITRG’s more detailed guide to the tax credits renewal process and their guide to dealing with tax credit overpayments
Find your local Citizens Advice Bureau
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