Table of Contents Hide
- What Are Tax Credits?
- Tax credits: Change Of Circumstances
- Child Tax Credits
- How To Manage Your Tax Credits
- How Do I Report Changes Of Circumstance or Tax Credits Number
- Tax Credits Calculator
- What is classed as change of circumstances for tax credits?
- Is tax credits based on previous year's earnings?
- Do I need to renew my tax credits if nothing has changed?
- Do savings affect tax credits?
Changes in circumstances in your work life or family life could severely affect your tax credits, and as such, you should report to HM Revenue & Customs any changes that occur in the course of the year. Changes must be reported within a month or even as soon as possible before tax credits renew, if not, you could be overpaid or incur an extra bill for yourself. This post is centred on explaining how changes in circumstances affect your tax credits, how they work and how to manage tax credits, the number to reach out to, to make claims, child tax credits, a tax credit calculator, and so on.
What Are Tax Credits?
Tax credits are government payments that provide extra money to people who need it, such as people caring for children, disabled workers, and low-income people. Child tax credits and working tax credits are the two types of tax credits available. Depending on your circumstances, you may qualify for one or both tax credits. People who work for a company or are self-employed but have a low income are eligible for the working tax credit.
A child tax credit is for parents or guardians who are responsible for children; it is paid in addition to child benefits and does not require you to work or be a worker. Your qualification depends on how much income flows into your family and how much you get.
HMRC is in charge of tax credit requests and payments. Because they’re based on how much you earn and your circumstances, tax credits are normally regarded as a benefit. However, they are not the same as benefits like income support and housing assistance. For starters, rather than the Department of Work and Pensions (DWP), HMRC is in charge of them. In addition, unlike other benefits, to manage your tax credits properly, you must renew your tax credit claims each year. Changes in circumstances may impact your Tax credits negatively or positively, while others may result in the termination of your claim, and as such, you may have to claim Universal Credit instead.
Tax credits: Change Of Circumstances
There are three different types of changes that could affect your tax credit eligibility:
- Changes that must be reported quickly to HM Revenue and Customs;
- Other changes in circumstances
- Income changes.
#1. Changes To Be Reported ASAP!
Changes to the following must be reported to HMRC immediately, or a fine may be imposed.
- Moving from singlehood to being married or starting to live with someone as if you are married
- Moving from being married to being single
- You receive Working Tax Credit childcare, and your average weekly childcare costs decline by more than £10 or to zero for four weeks in a row.
- Travel out for more than 2 months
- I stopped working 16 hours a week
- Work Shifts dropped below 30 hours a week
- You lose parental responsibility for a kid that was under your care
- A child in your household loses eligibility for tax credits. Either that kid drops out of school or starts claiming ESA on their own.
- A dependent child passes away.
- You lose your right to live in the UK if you just apply for Child Tax Credit.
#2. Changes Of Other Benefits
Other adjustments might wait until the end of the year to be reported. However, it may be to your greatest advantage to notify us of some changes sooner rather than later. Given the one-month backdating requirement, waiting too long to notify HMRC of a change that could increase your benefit could cost you money.
Taxable benefits, such as Carer’s Allowance and New-Style Employment and Support Allowance, are regarded as social security income for Tax Credits, thus, they can alter the number of Tax Credits you are entitled to.
Also, benefits for your kid or yourself, such as Disability Living Allowance and Personal Independence Payment, might increase your Tax Credits. And if you report a pay increase after a month, it can only be backdated for one month.
#3. Changes To Your Income
You don’t have to report every change in your income immediately, but if you’re unsure, you should. This can help you avoid overpayment or underpayment of your Tax Credits. Payment increases can normally be backdated one month if reported more than one month later.
Tax Credits are normally only affected by changes in income if it is more than £2,500 larger or smaller than the preceding tax year. As a result, even if you report a change, your Tax Credits may not rise or decrease until your tax credit claim is completed at the end of the tax year.
Child Tax Credits
We have highlighted a little of this in the early minutes of this post. However, we choose to broaden with an explanation as a lot of people, either as parents or guardians of children, have different reasons to claim child tax credits. The following are aspects of changes that have to do with children.
#1. If a child stops living with you,
If a child leaves your care, you must notify the authorities within one month. From the date they moved out, you will no longer be eligible for the Child Tax Credit for that child, but you will be eligible for it for any other children you are responsible for.
If you have no other children, the minimum hours you must work for the Working Tax Credit may alter, and you may no longer qualify. If you stop qualifying for Tax Credits because of this, you will not receive a four-week extension of the Working Tax credit; therefore, your Tax Credits will end when your child moves out. You might be able to get Universal Credit instead if this happens. There is no minimum number of hours you must work to qualify for Universal Credit, but if you are not working full-time, you may be obliged to hunt for an additional job.
If you don’t notify your child that they are moving out within one month, you may receive too much Tax Credit, which you will have to repay plus a penalty.
#2. If Your Child Leaves School
If you have a youngster above the age of 16 who drops out of school, you must report the change within one month. Not disclosing the change promptly, may mean you’ll be given an excessive Tax Credit, which you will have to repay, with a penalty on top of it.
Peradventure, your child’s programme just concluded, and you will no longer be eligible for the Child Tax Credit as of that date. If they are continuing their education (e.g., at a university), your Child Tax Credit can be extended until the conclusion of their study or until they reach the age of 20, whichever comes first.
Children who enroll for a job or training through their local careers service, or who apply to join the military can receive an additional 20 weeks of Child Tax Credit. Your youngster must be registered for a job or training with one of these providers and must notify HMRC within three months to earn the 20-week extension. You must also notify them if your child drops out of the program before the 20-week period is up.
For Children Between 18 and 19 years old
If you have a child who is 18 or 19 years old and chooses to leave school before the completion of their course, your Child Tax Credit will be terminated immediately, and you will not be eligible for a 20-week extension, even if they enroll in a job or training with an approved provider.
Lastly, if you do not have any other children, the minimum hours you must work to qualify for the Working Tax Credit may vary, which could mean you are no longer working enough to qualify. Hence, if you cease qualifying for Tax Credits because of this, you will not receive a four-week extension of the Working Tax credit; therefore, your Tax Credits will terminate on the same day as your Child Tax Credit. If this occurs, you may be eligible for Universal Credit instead. There is no minimum number of hours you must work to qualify for Universal Credit, however, depending on your circumstances, you may be compelled to look for an additional job if you are not working full-time.
#3. If A Baby Or Child Is Under Your Care
If you have a baby or another child who comes to live with you, you must notify the change within one month, although you are not required to do so. However, you should disclose the change as soon as possible because you could be eligible for additional Tax Credits. If you report a pay increase after a month, it can only be retroactive for one month.
A third or subsequent child born on or after April 6, 2017, won’t be eligible for the Child Tax Credit. For a third or subsequent child, you will still be eligible to claim any disability elements. The Working Tax Credit childcare component can be claimed for any number of children. But the maximum amount of assistance remains the same, whether you have two or more.
How To Manage Your Tax Credits
To manage your tax credits,s make use of this service to:
- If you estimated your self-employment income when you renewed, report it now (the deadline is 31 January)
- Inform HM Revenue and Customs (HMRC) of any changes in your circumstances,
- Find out what payment is like and when you’re likely to get payment
More information about how to manage your tax credits is available at GOV.UK
How Do I Report Changes Of Circumstance or Tax Credits Number
Various ways to report changes in circumstances include:
- Online on Gov.uk or write to the Tax Credits Office
- A phone call on 0345 300 3900 Outside UK: +44 2890 538 192
For future reference, if you contact HMRC regarding your Tax Credits, you should keep a record of the date and time of your call, or the date and time of your online report of the change, as well as what you informed them, just in case there are any problems.
Tax Credits Calculator
Determining how many tax credits a person qualifies for can be tough. Therefore, you should use HMRC’s tax credit calculator to determine if you qualify for both working and child tax credits.
You should be aware that this tax credit calculator does not explain how the award is calculated. But it does show a total amount based on your income and family status.
You’ll be able to order a tax credit claim form if it appears that you qualify.
Tax Credit Calculator Features
- Provides an estimate
- I cannot tell you if a change in your circumstances may result in the loss of your tax credits.
Before you begin with the tax credit calculator, you’ll require information on:
- Your earnings
- The earnings of your spouse
- Your hours of operation
- Whether you’re claiming benefits or have recently ceased claiming benefits
- The amount you spend on daycare on a weekly basis on average
- If you are subject to immigration control,’ your immigration status
How To Renew Tax Credits
HMRC’s results are based on your pay for the current tax year, not the entire year
HMRC sends out renewal packs, which you must normally complete and submit with your most up-to-date information. This is recalculated every year. HMRC provides renewal packs, which you must fill out and return with your current details. The renewal packages are mailed out between April and June, and the deadline is July 31.
If you applied for tax credits after April 6, 2023, you won’t get your first renewal package until April 2023.
Tax credits are benefits for workers and people caring for children. You could claim this benefit for reasons peculiar to your circumstances, however, to manage your tax credits properly, be sure to alert the tax credits office when a change occurs to avoid the dangers explained in this article. You are entitled to these benefits as one of the ways the government looks out for you as a citizen. So, if need be, don’t hesitate to call the tax credit office for help. And like earlier mentioned, you don’t have to worry about how your tax credits are being calculated; a tax credit calculator is found on the government site
What is classed as change of circumstances for tax credits?
Change in your circumstances includes your money, work, home life, and children.
Is tax credits based on previous year's earnings?
Yes, tax credit awards are usually based on the previous year’s income. however, you can manage tax credits by reporting any new circumstances to the tax credit office (HMRC)
Do I need to renew my tax credits if nothing has changed?
If your details are correct, you do not need to do anything, and your tax credits will be automatically renewed. You must tell HMRC about any change to your circumstances regarding tax credits or if anything in your pack is incorrect. You’ll be sent a statement and will have to pay back the tax credits you’ve received since April 6, 2023.
Do savings affect tax credits?
For tax credits, the savings limit of £16,000 doesn’t exist. Instead, the amount of income (typically interest) you receive from those savings affects your tax credits. If you receive less than £300 in income from those savings, it won’t affect your tax credits.