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In the first of 4 articles focusing on those suffering reduced income levels in the current economic downturn, the Low Incomes Tax Reform Group gives advice on Tax and National Insurance.

Introduction

Many people are being affected by the recession through job losses, reductions in income and increased living costs. Now, more than ever in recent years, it is important you claim all that you are entitled to, and let HMRC know if your circumstances have changed. 

Over a series of four articles, we will be providing some information which you may find helpful if you have been affected by the economic downturn.

The articles will cover in turn:

1. Tax and National Insurance Contributions (NICs)
2. Tax saving pointers
3. Tax credits
4. State benefits

Each will provide links to more detailed guidance on the Low Incomes Tax Reform Group’s (LITRG) website, or other external websites such as DirectGov, and a list of relevant contact numbers which you may find helpful.

Tax and National Insurance Contributions (NICs)

Redundancy / unemployment

If you are being made redundant, you may be entitled to statutory redundancy pay.  Your contract may entitle you to a higher payment than the statutory minimum and your employer may be more generous still. Some payments can be tax free. This is explained further in the tax and redundancy section of LITRG’s website.

If you become unemployed, you might not use your full tax free allowances this tax year, so you might be able to claim some tax back that you paid earlier in the year by completing form P50 and sending it to HM Revenue & Customs (HMRC).

NICs are calculated for each week or month you work and are not refunded if you lose your job part way through the year. Nevertheless they do count towards the contributory benefits which you might need to claim in the coming months, and ultimately towards your state pension.

Reduction in income

If you are an employee and remain in the same job but your income has dropped, for example because you are no longer required to work overtime, the Pay As You Earn (PAYE) system should recalculate your tax as you go along.  If your PAYE Code is correct you need take no further action.

But if you are self-employed and your business profits fall, you might be able to claim to reduce the payments on account you make under self assessment.

If you are aged 65 or over, you are entitled to a higher age-related personal allowance unless your income is too high, in which case your age-related entitlement is gradually withdrawn until you get only the basic personal allowance. If you are in this situation, but your income falls over the coming months, make sure you check whether this entitles you to the higher age-related personal allowances.

Struggling to pay your tax?

If you are having trouble making tax payments, contact HMRC as early as possible to discuss your situation. They might agree to let you have more time to pay, although you will still be charged interest on any amount not paid by the due date. The TaxAid website gives more information on negotiating time to pay with HMRC.

Useful telephone numbers

ACAS (Advisory, Conciliation, Arbitration Service) – Advice on employment issues
0845 7474747  (Textphone – 0845 60 61 600)

Redundancy pay helpline
0845 1450 004
 
Labour Relations Agency (Employment issues for Northern Ireland)
028 9032 1442

National Insurance contributions
0845 302 1479 (Textphone 0845 915 3296)

National Minimum Wage helpline
0845 600 0678 (Minicom 0845 915 3296)

Newly self employed helpline
0845 915 4515 (Textphone 0845 915 3296)

HMRC Business Payment Support Line
0845 302 1435

HMRC Time to Pay helpline for individuals
0845 366 1204