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Working Tax Credit is designed to top up your earnings if you work and are on a low income. If you get Working Tax Credit, find out how this change affects you. Our free and flexible Couch to Financial Fitness plan will help you build confidence to manage your money. Step by step we can help you cut your spending, develop core saving muscles, and create better habits for the future.
Are you already claiming Working Tax Credit? Then how and when you move to Universal Credit depends on if you have to make a new claim because of a change in circumstances.
You must tell HMRC the government department that issues Tax Credits within 30 days if you have a change of circumstances. This could be:. Find out more in our guide Help to Save explained. HMRC will tell you what you need to do. Call the Tax Credit Helpline on to let them know about any changes to your circumstances. They can help you:. For more details, go to Citizens Advice. Or, in England, call In Wales, call Visit Citizens Advice Scotland or call Universal Credit works differently.
Find out more at nidirect. Are you getting Working Tax Credit, work at least 16 hours a week and pay for childcare? For instant money guidance based on your circumstances, get started with our Money Navigator tool. In most cases, you must use registered or approved childcare. This can include childminders, playgroups and nurseries.
This is up to certain maximum weekly limits. Find out more on the GOV. UK website. Every time you report changes to the HMRC over the phone, write down who you spoke to and when and keep your record safe. If you report changes online, print or keep a copy of the page confirming the changes have been submitted.
If you decide to write to HMRC to tell them about a change, keep a copy of the letter and get proof of posting it.
See our Survival guide to dealing with tax credit overpayments for advice on what to do. This is especially true if, earlier in the year, you told HMRC you were likely to receive less income that you did last year and asked them to pay your tax credits on your estimated income.
When you get your tax credit renewal forms, make sure you give the right information by checking your award letter from the DWP. If your benefit award changes, make sure you tell the HMRC straight away. Keep a record of who you spoke to, and when. These forms now ask you to either 'check now' or 'renew now'.
If yours say 'check now' you must tell the HMRC of any errors by July 31st, if you fail to and there is something wrong, your tax credits could stop and you could be fined. If yours say 'renew now' you send them back or do them online by the 31 July, or your claim will stop. If you are using paper forms, post them at the post office and ask for a certificate of posting. Keep this safe as you can use it as evidence that you did in fact return the forms.
If you contact HMRC within 30 days, they should be able to renew your claim over the phone. More information can also be found in the Tax Credits Technical Manual. Financial hardship in ongoing recovery cases. In certain circumstances, HMRC will agree to reduce the recovery percentages from the figures set out above. Any financial hardship in ongoing recovery cases is dealt with by HMRC's tax credit operational processing teams.
This form is used to ask HMRC to reduce recovery rate where it is causing financial difficulty. The form asks for various details about the claimant and their partner, their household and their income and expenditure. Claimants will need to log in to their personal tax account. To do this they will need to use the Government Gateway for verification. If they do not have an account, they can set one-up and if they do have an account they will need to sign-in. Each time someone signs in to their PTA, they will need their mobile phone to receive an access code.
Once in the PTA, claimants will need to click on tax credits and on the first page there is a list of tax credit forms that can be filled in and submitted through the PTA. After the form has been submitted, it can be tracked via the PTA which is again accessed from the account home page. The first step is for the claimant to contact the tax credit helpline to ask that the recovery percentage is reduced. Once a referral is received by the hardship team, they will send out an income and expenditure form TC Once the form is returned, HMRC will compare the income and expenditure figures against figures they hold for various household expenses and make a decision.
HMRC aim to make a decision within 2 working days of the form being returned, however sometimes HMRC may contact the claimant by phone or letter if no telephone number is held for more information or evidence before making a decision. Any arrangement will only last until the end of the current tax year.
It appears there is no way to challenge a refusal to reduce the percentage recovery rate, but a fresh hardship request can be made. If the cases warrants it, a complaint could also be made.
The law says that an overpayment debt for a couple can be collected by HMRC in full but only once! The stated policy of HMRC where this has happened following a household breakdown is to write to both members of the former couple making every effort to trace any former partner for whom they do not have an up-to-date address. If the claimant believes that there should be a difference in what they and their former partner should pay, then HMRC will take into account the circumstances of both of them and may ask each of them to pay a different amount, or one of them to pay the full amount.
Alternatively, they can agree between them to pay different amounts and inform HMRC of this decision. This often meant the mother with care of the children had to repay the whole joint overpayment debt where the absent partner was difficult to trace. Instead they will pursue the other partner, and if they cannot collect the money will not go back to the engaging partner to collect it.
It is important to note that the law still allows HMRC to pursue either partner for the full amount of the joint debt. Also, this process is not well advertised by HMRC, so you should ensure that you ask Debt Management and Banking if you think it applies to your client.
Notional entitlement Sometimes known as notional offsetting. Sometimes, tax credit claimants who form a couple or who become single, either because they separate or because one partner dies, are slow in reporting the change to HMRC.
Yet in many cases, if they had acted promptly they would have continued to be entitled to tax credits, albeit in a different capacity. Until 18 January , HMRC would recover the whole of any overpayment arising on the old claim, but give no credit for what the claimant would have received had they made a new claim at the right time.
From 18 January , HMRC introduced a new policy that means tax credits recipients who start to live together, or who become single after being part of a couple, but are late reporting the change to HMRC or don't report the change and have their award changed as a result of a compliance investigation by HMRC , can ask HMRC to reduce the overpayment on their old claim by whatever they would have been entitled to had they made a new claim promptly.
A new claim must be made for this policy to apply. If this doesn't happen automatically, claimants should contact the tax credit helpline to ask for their case to be referred to the 'notional entitlement or notional offsetting ' team in the Tax Credits. Note that the notional offsetting will not cover the one month previously three months by which the claimant will be able to backdate their new claim.
Notional offsetting is available even if the new claim for tax credits is not possible. We understand that HMRC may ask for information in order to help to calculate what tax credit entitlement would have been if the new tax credit claim was possible.
Anyone who thinks notional offsetting should apply should contact HMRC's tax credit helpline. As noted above, HMRC have confirmed they will not apply notional offsetting where the claimant's behaviour was fraudulent. Prior to Autumn , a similar rule existed that prevented notional offsetting from being applied where the claimant made a 'deliberate error'.
The term 'deliberate error' is no longer used. The Claimant Compliance Manual contains some information about the term 'fraudulent' but this seems only to replicate the previous guidance on deliberate error and therefore we continue to seek clarification from the HMRC particularly about cases where there was no financial gain at all from the failure to report to a change. More information about notional entitlement can be found in the HMRC compliance manual.
The manual covers three distinct periods, prior to 17 May , between 17 May and 18 January This is because notional entitlement applied until May when it was withdrawn. See our understanding couples section for more information about how to request notional entitlement. HMRC call this type of off-setting Class 11 remission. It is not widely known and for that reason can often be overlooked.
Further information is available in the tax credit manual. Some people will be paying back two overpayments, one via ongoing recovery and another via direct recovery. This often happens where there is an overpayment on an old claim, and a new overpayment on a current claim. Since August , HMRC have implemented a new policy which means that any direct recovery action should be suspended until the ongoing recovery ends.
Whilst we welcome this policy, HMRC are not proactive in telling claimants about it. If this applies, you should ask Debt Management and Banking to suspend the direct recovery action.
HMRC have produced some information for cases involving claimants with mental health issues. The following is reproduced from the intermediaries guidance:. Your employer may have been claiming part of your wages through the Job Retention Scheme.
HMRC will have treated you as continuing to work your normal hours those before the temporary lay-off until 30 September You did not need to tell HMRC about any temporary lay-off because of coronavirus. See below for what you need to report from 1 October Unpaid leave: This is where you are were still employed but agreed with your employer that you would take leave that was unpaid. You did not need to tell HMRC that you were on temporary unpaid leave because of coronavirus. Self-employed: If your hours reduced or your self-employed work temporarily ceased due to coronavirus.
As long as you were still trading i. You did not need to tell HMRC about a temporary change in your hours because of the coronavirus. If your working hours reduced temporarily including to nil due to coronavirus up to 30 September , the special rules set out above applied. HMRC will have continued to treat you as working your usual hours — those you were working before they were impacted by the coronavirus pandemic.
These temporary rules ended on 30 September What you need to do from 1 October depends on what hours you are working at that point. The legislation is complicated but in summary:. Tariq needs to work at least 16 hours a week to qualify for working tax credit. Prior to October , he was working 25 hours a week. From October , he was on a flexible furlough and working 10 hours a week. He resumed his normal hours of work 25 hours a week from 17 September He does not need to notify HMRC as the temporary reduction in his hours had ended and he was back working his normal hours before 1 October Stella and Zeb both need to work at least 16 hours a week to qualify for working tax credit.
Prior to January , they were both working 20 hours a week. They were both put onto flexible furlough in January and started working 12 hours a week each. In September, their employer told them they will be resuming their normal hours of work 20 hours a week from 25 November. Stella does resume her normal working hours from 25 November. However, Zeb does not resume his normal hours of work and on 25 November his employer asks him to continue working reduced hours for the time being.
Zeb must notify HMRC that his hours have changed from 20 to He will be entitled to working tax credit due to the 4 week run-on from 25 November and then his working tax credit will end. If he resumes his normal hours within that 4-week period, he will need to notify HMRC immediately and then his working tax credit will be allowed to continue. Mia needs to work at least 30 hours a week to qualify for working tax credit.
She was put on furlough in August as no work was available. She will be entitled to a 4 week run-on of working tax credit from 1 October. If her normal hours resume within that 4-week period, she must notify HMRC immediately about the increase in her hours and her working tax credit will be allowed to continue.
Jenna needs to work at least 16 hours a week to qualify for working tax credit. She normally works 35 hours a week but has been on flexible furlough and working 25 hours a week since March On 7 September, she agrees to reduce her normal hours from 35 to 25 hours a week permanently.
She should notify HMRC of this permanent change immediately because, as her hours have permanently reduced below 30, she will stop being entitled to the hour element.
You must inform HMRC that you have been made redundant because this is a permanent change. If this means you no longer qualify for working tax credit, you will receive a 4-week run-on of working tax credit. If you find another job in the 4-week run-on period, then you should be able to continue getting working tax credit. However, if you make a claim for universal credit in that four-week period then the working tax credit and any child tax credit will only be paid up until the day before you claim UC.
If you qualify for child tax credit as well, that will continue as you do not need to work to claim child tax credit. If your income falls and you need financial support see below. Since the coronavirus pandemic started, there have been hundreds of coronavirus related grants and payments paid out by UK government, devolved governments in Scotland, Wales and Northern Ireland and Local Authorities.
Some of these payments count as income for tax credits, some are disregarded. We are still working through the various payments and trying to clarify the position for tax, national insurance, tax credits and universal credit, so please do check back on this page.
Although tax credit rules usually follow the tax rules, so if a payment is taxable then it is likely to be income for tax credit purposes, there are exceptions to this rule and so you should not assume that if it is taxable it counts as income for tax credit purposes. There are special rules on how the grant is taxed and how to declare your SEISS grant on your tax return if you are an individual partner in a partnership — depending on whether the grant was paid into the partnership and treated as partnership income or whether you received it as an individual partner.
As explained in our article on where to put the grant on your tax return, it will be included in your taxable profit figure. Usually for tax credits, you will take the figure from a certain box on your tax return — depending on which return you fill in although there are some different rules if you use averaging as a farmer or creative artist :.
If you want to use the trading allowance, it cannot be used against SEISS grant income for tax purposes or tax credit purposes — see our guidance for more information. If you are self-employed, then the payments will form part of your taxable trading income on your tax return following normal accounting rules. If you have reported the grants correctly on your tax return usually box 10 on the self-employment short pages and box 16 on the self-employment full pages , then you should use the boxes detailed above for SEISS, as that will ensure the grants flow through as income into the correct year for tax credits.
If you have reported the grants correctly on your tax return, usually box 10 on the self-employment short pages and box 16 on the self-employment full pages then you should use the boxes detailed above for SEISS, as that will ensure the grants flow through as income into the correct year for tax credits.
The fact that your employer might have received payments under the job retention scheme doesn't affect your tax position as an employee and doesn't affect your income for tax credits. Also, if you are an individual who received a JRS grant to pay an employee — for example a nanny then you do not need to declare this grant for tax credits as it is not taxable.
Our understanding is that these payments were made through the payroll and are therefore subject to tax and NI. They also count as income for tax credits. However, you must be careful not to double-count them. They will already be included in your P60 figure and if HMRC have used data from the tax system to show your income on your renewal notice, the bonus should already be included.
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