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Robin Williamson of LITRG provides tips to help people review their money affairs as regards tax, tax credits and benefits.

Introduction

Now that the 31 October deadline for self assessment returns has passed, this is a good time for people to check that they are not missing any other tax deadlines or losing out on any benefits.

If you Missed the Deadline for Filing your Tax Return on Paper

If you have filed your 2008/09 self-assessment return on paper, and you posted it in good time to reach HMRC by 31 October, or you handed it in to a tax office on or before Monday 2 November, all should be well.

However, if you have not yet filed your paper return, there are now three ways of avoiding a £100 penalty:

• by filing on paper now and paying all the tax due by 31 January 2010;
• by not filing on paper, but instead filing online by 31 January 2010; or
• by filing on paper if you have a reasonable excuse for being late, and appealing against the ensuing penalty notice on those grounds.

Note that HMRC have a very restricted view of what constitutes a reasonable excuse. They will normally accept industrial action at the Post Office (but see below), loss of tax records through fire, flood or theft, serious illness which prevented you from dealing with your tax affairs (for example coma, heart attack, stroke), or bereavement of a close relative or domestic partner.

However, if HMRC reject your appeal, you have the right to ask for an independent review of their decision, or to seek a Tribunal hearing. 

Postal strike

If HMRC tell you that they did not receive your return on time even though you posted it before the deadline, you can appeal against any penalty notice on the grounds that you have a reasonable excuse for missing the deadline. Your excuse will be the postal strike.

It will help if you can show a certificate of posting or a recorded delivery slip to prove that you posted it on a particular day. However, do not be put off making your appeal if it happens you cannot produce such documentary evidence.

The deadline for appealing against a penalty notice is 30 days from the date on the notice. This means that if the penalty notice is itself delayed in the post, you will have to move quickly. The date on which you receive it doesn’t count in determining the appeal deadline. You can appeal late in certain limited circumstances, but the only safe course is to meet the 30 day time limit if you possibly can.

Paying your Tax through PAYE

If you have filed your return on paper, you have until the end of November to request HMRC to collect your tax for 2008/09 through your PAYE code, provided the amount due is £2,000  or less.

You can still request this treatment of your tax liability up to the end of November but there is no firm guarantee that HMRC will be able to include the tax in your code. After the end of November this option will not be available where you file manually.

Tax Credits and Child Benefit

Cheque Payments during the Postal Strike

If you receive your tax credit or child benefit payments by cheque rather than directly into your bank account, your money might be delayed in the post. HMRC have said that if you cannot meet your essential living expenses while waiting for the cheque to arrive, you should telephone the helpline and speak to an adviser.

Did you provide an Estimate when completing your Tax Credit Renewal forms?

After the end of each tax year, tax credit claimants receive forms to complete. These forms do two things. They ask for your income for the year just ended so that your claim can be finalised, and they act as a claim for the new tax year.

Some people, particularly those who are self employed, may not have had their 2008-2009 figure confirmed in time to enter it on their form. Instead they would have provided HMRC with an estimate, and ticked a box to indicate that this was only an estimate.

It is essential that anyone who provided HMRC with an estimate ensures that they give HMRC their actual 2008-2009 figure by 31st January 2010.

Benefits

Changes to the Capital Rules for Pension Credit, Housing Benefit and Council Tax Benefit

Basic ‘guarantee’ pension credit can be claimed by anyone aged 60 or over whose income after tax is low enough to qualify. To qualify for additional ‘savings’ pension credit a person has to be at least 65.

In calculating income for pension credit purposes, claimants are treated as having ‘deemed income’ of £1 for every £500 of savings they have above a certain threshold. Prior to 2 November 2009 this threshold was £6,000, and savings below that amount were ignored. If the person was permanently residing in a care home, the threshold was £10,000. 

Similar rules on savings also apply when calculating housing benefit (HB) and council tax benefit (CTB).

From 2 November, any savings of up to £10,000 can now be ignored whether the person lives in a care home or not. This means that you will only be assessed as having income of £1 for every £500 you have in savings above the £10,000 threshold.

The Pension Disability and Carers Service will be reviewing all cases this month to ensure that they are re-assessed using the new threshold. There are complicated interactions between pension credit and HB/CTB depending on which part of pension credit you get and they could mean that although the majority of people will be better off, a very small number will be slightly worse off.

Those people will receive a small one-off compensation amount of £40. If you are unsure how the changes affect you, you should contact the Pension Disability and Carers Service for Pension Credit or your Local Authority for Housing Benefit and Council Tax Benefit.

These changes also mean that some people who didn’t qualify for pension credit, HB or CTB may now do so. If you are not already receiving any of these benefits, or have been refused them because of the previous rules regarding savings income, now is a good time to contact your Local Authority or the Pension Service to find out if you are entitled to make a claim.

Child Benefit no longer affects HB or CTB

Another change from 2 November is that child benefit will no longer be taken into account when working out entitlement to HB or CTB.  The Government believes about 200,000 people will get an increase to the benefits they are already receiving and local authorities will be checking these cases and contacting the people concerned.

However anyone who now thinks they may qualify for HB or CTB because of this change should contact their local authority and make a claim.