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LITRG is reminding people who received tax credits during 2016/17, and who have received renewal forms from HMRC, to act by 31 July so that their payments do not stop.

Introduction

The tax credits renewals process does two things: it finalises the tax year that has just ended (2016/17) and it acts as a claim for the new tax year. Even if someone no longer wants to claim or thinks they are no longer entitled, if they claimed tax credits at all during the 2016/17 tax year, they will still receive papers and must follow HMRC’s instructions to complete and finalise their claim for 2016/17. Even if claimants, such as the self-employed, do not yet know their actual income for 2016/17, they must still submit an estimate by 31 July. They have until 31 January 2018 to either confirm or replace the estimate with the actual figures.

Exception

The only exception to this will be if a tax credit claimant moved to universal credit in 2016/17. In that case HMRC should have already finalised the 2016/17 claim and so no renewal pack will be issued.

The Low Incomes Tax Reform Group (LITRG) recommends

Anyone who has not received their renewal pack by now should contact HMRC to chase it up. They must then carefully check the details on the renewal forms before making their declaration by 31 July.

The renewal deadline

If you miss the deadline, you could find yourself having to repay to HMRC all the tax credits you have received since the start of the tax year in April. Once the 31 July deadline passes, if a claimant has not renewed their claim, HMRC stop payments and issue a Statement of Account. If the claimant contacts HMRC within 30 days of the date on the Statement of Account, the renewal claim can be reinstated from 6 April 2017. If they do not, then all payments made from 6 April will be owed back to HMRC and the claimant will need to make a new claim that can only be backdated up to one month. If the claimant has good cause for missing the 31 July deadline but replies by 31 January 2018, then they may be able to have the claim reinstated from 6 April.

Reply-required and auto-renewals

Some claimants will receive two forms (one with a red line across it) with accompanying guidance notes. These are known as ‘reply-required’ renewals because the claimant must respond to HMRC by 31 July. Other claimants will receive just one form (with a black line across it) and these people (known as ‘auto-renewals’) will have their claim for 2016/17 automatically finalised and renewed for 2017/18 but they must still contact HMRC if something on the form is wrong or they have had a change of circumstances.

Whether you are required to reply or are an auto-renewal, it is important you take any necessary action as soon as possible so that HMRC know how much to pay you for the rest of the year. Even if you are no longer entitled to credits, you must still reply in order that HMRC can finalise your 2016/17 claim. If you have been paid too little for the previous tax year, the sooner you renew, the sooner you will receive that underpayment.

How to renew tax credits

Tax credits can be renewed online, via the HMRC App, by telephone or through the post. HMRC’s on-line service is found on the official GOV.UK website, either via their personal account (if they have set one up) or by going directly to the ‘Manage your tax credits’ service. Further information on renewing tax credits (including the requirements for doing so) and how the process for the renewal can be started can be found on GOV.UK. HMRC can be contacted either using the official HMRC online service via the GOV.UK website or the official phone number – 0345 300 3900. The HMRC App is free and can be downloaded from the App Store or Google Play store. More information on the renewals process generally can be found on the LITRG website.

Warning of scams

Unfortunately, this time of the year sometimes sees an increase in fraudulent activity which often targets the most vulnerable taxpayers. Claimants should remember that tax credits can only be renewed using the official HMRC phone number, GOV.UK website, the HMRC app or by post to HMRC’s Tax Credit Office.

Guidance notes

It’s important to read the guidance notes carefully, particularly the parts that explain what counts as income for tax credits. Some of the renewal documents will show income figures that HMRC have obtained from their tax system, but these may not include several deductions that are allowable for tax credit purposes and people should read the notes carefully to see if any of these deductions apply to them. If using the online system to renew, claimants should make sure they enter their income figure after any deductions and carefully follow the notes that come with the paper pack.

Earnings and pensions data sent to HMRC

Employers and pension providers send data about earnings and pensions to HMRC for income tax and national insurance purposes throughout the year via the Real Time Information (RTI) system. HMRC sometimes use this data in the tax credit renewals process. For those who receive auto-renewals, this data will be used to finalise the 2016/17 claim and renew the claim for 2017/18 unless the claimant tells HMRC that the figures are incorrect or that they have deductions to be made from those figures. For reply-required renewals, the data will be shown on the form as a guideline, but claimants should still check the figures carefully and, if they are incorrect or the claimant is entitled to make deductions from them, substitute the accurate 2016/17 information on the declaration form.

NB

LITRG understands that the online system asks claimants to enter their earnings figure before anything is taken off – it does not explain that some deductions should be made from the figure on their P60. Claimants should therefore read the notes very carefully to ensure they are not missing out on extra tax credits. See GOV.UK.

Useful links

LITRG guidance: How do I renew my tax credits claim?
GOV.UK: How to renew tax credits
HMRC guidance: Renew your tax credits now