Tax Credits updates required this month

Families and individuals that receive tax credits should ensure that they review their tax credit claims by 31 July 2020. Claimants who do not inform HMRC about relevant changes in their circumstances by the deadline date may have their payments stopped.

HMRC has sent tax credits renewal packs to tax credit claimants and is encouraging recipients who need to respond to do so online. All renewal packs should have been received by the end of June. A renewal is required if the pack has a red line across the first page and it says, 'reply now'. If the pack has a black line and says, 'check now', recipients will need to check the details are correct. If the details are correct the tax credit awards will be renewed automatically. The self-employed, those in receipt of taxable social security benefit or those who have other income may need to review their total household income and advise HMRC if the income held is incorrect.

As part of the package of measures to tackle the Coronavirus outbreak, the government in April announced that the basic element Working Tax Credit payments would be increased from an expected £1,995 to £3,040 for the 2020-21 tax year starting on 6 April 2020. This increase of £1,040 is an increase equivalent to £20 per week for the current tax year. The actual maximum additional amount that Working Tax Credits recipients receive depends on their individual circumstances, including their level of household income.

Working Tax Credits are now increased

We would like to remind our readers that as part of the package of measures to tackle the Coronavirus outbreak, the basic element Working Tax Credit payments was increased to £3,040 for the 2020-21 tax year.

This increase of £1,045 is equivalent to an extra £20 each week for the current tax year. The actual amount that Working Tax Credits recipients will receive depends on their specific circumstances, including their level of household income.

If you claim Working Tax Credits, you do not have to take any action or contact HMRC – the increase in your payments should have started automatically from 6 April 2020.

The government also increased child benefit, other tax credits rates and thresholds and guardian's allowance by 1.7% from 6 April 2020.

There have also been corresponding increases in Universal Credit available to many employed and self-employed workers on low incomes or who have become unemployed. This has seen the government increase the basic element and remove the minimum income floor in a move to benefit the self-employed. The minimum income floor does not currently apply, this measure is due to last until the Coronavirus outbreak is over.

Minimum hours for Tax Credits

It has been confirmed that the minimum weekly hours requirement to be eligible for tax credits has been temporarily suspended because of coronavirus. Tax Credits can provide top-up payments to those on low incomes.

Under normal circumstances, you must work a certain number of hours a week to qualify for these credits. If you are working reduced hours due to coronavirus or as a result of being furloughed your tax credits payments will be unaffected if you are still employed or self-employed.

HMRC will treat you as working your normal hours until the Job Retention Scheme and Self-Employment Income Support Scheme close, even if you are not using either scheme.

You should still notify HMRC of any other changes in income, childcare and hours in the normal way. You must tell HMRC if you (or your partner) lose your job, are made redundant or cease trading.

Tax credits increase

The basic element Working Tax Credit payment has been increased from an expected £1,995 to £3,040 for the 2020-21 tax year that commenced 6 April 2020. This is part of a package of measures to help support families coping with the Coronavirus outbreak.

This increase of £1,040 is an increase equivalent to up to £86.67 per month for one year from 6 April 2020. The actual amount that Working Tax Credits recipients will receive depends on their circumstances, including their level of household income.

The government had previously confirmed that from 6 April 2020, the child benefit rates, and other tax credits rates and thresholds would be increased in line with the Consumer Prices Index (CPI), resulting in a 1.7% increase. For example, the child benefit rates for the only or eldest child in a family increased to £21.05 and the weekly rate for all other children to £13.95.

These changes were announced before the Coronavirus outbreak and represented the first increases in most rates since 2016. During this period, most working-age benefits (except for disability and carer’s benefits) were held at their 2015-16 cash value.

If you claim Working Tax Credits or receive any other benefits such as Child Tax Credits, Child Benefit or Guardian’s allowance then the increased payments should be automatically applied.

COVID-19 and claiming benefits

The government has announced that certain benefits will be increased as part of the package of measures to help households affected by COVID-19. This will see the standard rate of Universal Credit and Tax Credits increased by £20 a week (£1,040 per year) for one year from 6 April 2020.

It has earlier been announced as part of the Budget measures that the self-employed are to be provided with easier access to Universal Credits and the Contributory Employment and Support Allowance. This means that the self-employed with no income can effectively claim Universal Credit in the same way as someone who's unemployed. However, there is a five-week waiting period before a first payment is made. An advance payment can be claimed once a claim is accepted but must be paid back. The usual requirement to attend a Jobcentre in person is currently not required and claims can be made on-line.

There will also be up to £1bn of additional support for renters through increases in housing benefit and Universal Credit. From April, Local Housing Allowance rates will pay for at least 30% of market rents in each area. This applies to all private renters who are new or existing Universal Credit housing element claimants and to existing Housing Benefit claimants.

Reminder to renew your tax credit claim

Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2019. Claimants who do not renew on-time may have their payments stopped.

HMRC has sent tax credits renewal packs to tax credit claimants and is encouraging recipients to renew their tax credits claim online. All renewal packs should have been received by the end of June. A renewal is required if the pack has a red line across the first page and it says, 'reply now'.

Claimants need to notify HMRC where there have been changes to the family size, child care costs, number of hours worked and salary. Details of previous year's income also need to be completed on the form to allow HMRC to check if the correct tax credits have been paid. Claimants must also inform HMRC of any changes in circumstances not already reported during the year such as new working hours, different childcare costs or changes in pay.

The Child Tax Credit has been designed to help lower income families with children. Credits are available to families with low to moderate income. Child Tax Credit is paid directly to the main carer in the family either weekly or monthly and is usually paid directly to a designated bank or building society account. The Working Tax Credit assists taxpayers on low incomes by providing top-up payments. Universal Credit will eventually replace tax credits, and some other social security benefits.

Working tax credits you could claim

The Working Tax Credit (WTC) is designed to help taxpayers on low incomes by providing top-up payments and includes those who do not have children. There are extra amounts available for qualifying childcare expenses and working households in which someone has a disability. The basic amount of WTC is £1,960 a year and is always included for qualifying applicants. There are also payments that may be available for couples or for those with certain disabilities.

In order to satisfy the rules for claiming the WTC, claimants must work a certain number of hours a week. For couples, one member has to work at least 16 hours a week, with the joint total being at least 24 hours. Single people who are responsible for 1 or more children can claim the WTC if they work at least 16 hours per week. Claims can also be made by those without children who work at least 30 hours per week if they are aged over 25. There are different limits for those claiming the disability element.

Backdated claims for WTC will usually only be backdated for a maximum of one month. There are exceptions for those with refugee status and claimants that qualify for certain sickness or disability benefits.

Making a new claim for tax credits is no longer possible for most people and it has been replaced by universal credit. Universal credit will eventually replace tax credits and other social security benefits. Existing tax credit claimants are expected to be moved across to universal credit between 2020 and 2023 although a small pilot will start from July 2019.

Renewing your tax credit claim

Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2019. Claimants who do not renew on-time may have their payments stopped.

HMRC has commenced sending tax credits renewal packs to tax credit claimants and is encouraging recipients to renew their tax credits claim online. All packs should be with recipients by the end of June. A renewal is required if the pack has a red line across the first page and it says, 'reply now'.

Claimants need to notify HMRC where there have been changes to the family size, child care costs, number of hours worked and salary. Details of previous year's income also need to be completed on the form to allow HMRC to check if the correct tax credits have been paid. Claimants must also inform HMRC of any changes in circumstances not already reported during the year such as new working hours, different childcare costs or changes in pay.

The Child Tax Credit has been designed to help lower income families with children, credits are available to families with low to moderate income. Child Tax Credit is paid directly to the main carer in the family either weekly or monthly and is usually paid directly to a designated bank or building society account. The working tax credit assists taxpayers on low incomes by providing top-up payments.

In some areas of the country new claims for tax credits may no longer be possible as the introduction of Universal Credit is slowly rolled out. Universal Credit will eventually replace tax credits, and other social security benefits.