TAXING TIMES
Urgent warning for thousands on benefits who risk payments STOPPING – what to do now to avoid fine of £3,000
Plus what happens next when tax credits end
THOUSANDS of people on tax credits need to act soon - or risk payments stopping and even a hefty fine.
Around 730,000 households have been sent reminders about the benefit and many will need to let HMRC know of any changes that affect payments.
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Working tax credits are worth £2,435 for the basic element and child tax credits are worth £3,455 to help those on low incomes.
There are also extra amounts, for example for those who are single parents or have disabilities.
Tax credits need to be renewed each year, and claimants should have received renewal packs in the post by June 20.
These need to be responded to by July 31 with information about your circumstances if there's a red line and it says "reply now".
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This includes your income, and your partner's if you have one, for the last tax year which runs from April 6, 2023 to April 5, 2024.
Plus any changes to things like working hours, how much you pay for childcare, or if a child leaves home or is over 16 and leaves education or training.
If you don't tell HMRC about changes you could be fined £300.
If you give them the wrong information you could be hit with an even bigger fine in the worst case.
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You could also be asked to pay back money if you've been overpaid tax credits based on incorrect or out of date information.
Andy Wood, a tax expert at Tax Natives, said: “If you are a tax credit claimant, you should inform HMRC of any changes in your circumstances, such as changes in living arrangements, childcare situations, or employment status. Failure to do so could result in major financial consequences, such as loss of tax credits or fines of up to £300."
"Non-compliance with reporting requirements can have serious repercussions such as loss of tax credits, repayment demands, and even fines of up to £3,000 if incorrect information is provided."
Renewing tax credits can be done online or via the HMRC app, as well as by phone or post.
Online go to www.gov.uk/manage-your-tax-credits or download the HMRC app via the Google or Apple app store, depending on your device.
To renew over the phone call 0345 300 3900, or send the form to: Tax Credit Office, HM Revenue and Customs, BX9 1LR.
If you haven't received your renewal pack you can contact HMRC on the same phone number.
You won't need to renew your claim if there's a black line on your renewal pack - in this case it's done automatically.
HMRC estimates that around 10,000 will have to act to continue getting payments.
It's the last time anyone on tax credits will have to renew the benefit as tax credits end on April 5, 2025 under current plans.
Between now and then, anyone claiming tax credits will be asked to move to Universal Credit under what's known as managed migration.
Eventually six so-called legacy benefits like tax credits will be replaced by UC.
You'll get a letter in the post asking you to move over, and then you'll have three months to make a new claim for UC.
UC is worth hundreds of pounds a week, with extra amounts if you have children or rent to cover - the exact amount depends on your circumstances.
For example, if you're single and under 25 the standard allowance is £311.68 and for couples over 25 it's £617.60 for both.
Those in work can still be entitled to UC. How much depends on the hours they work.
But for now anyone on tax credits should check if they need to renew their claim before July 31.
Will I be better off on Universal Credit?
Around 1.4million will be better off on Universal Credit, the government calculates.
A further 300,000 will see no change in payments, while around 900,000 will be worse off under Universal Credit.
Of these, around 600,000 are expected to get top-up payments if they move under managed migration, so they don't lose out on cash immediately.
The majority of those - around 400,000 - are claiming Employment Support Allowance (ESA).
Around 100,000 are on tax credits while fewer than 50,000 each on other legacy benefits are expected to be affected.
Examples of those who may be entitled to less on Universal Credit according to the government include:
- Households getting ESA who and the Severe Disability Premium and Enhanced Disability Premium
- Households with the lower disabled child addition on legacy benefits
- Self-employed households who are subject to the Minimum Income Floor after the 12 month grace period has ended
- In-work households that worked a specific number of hours (eg lone
- parent working 16 hours claiming Working Tax Credits
- Households receiving tax credits with savings of more than £6,000 (and up to £16,000)
- But they could miss out on any future increase to benefits and see payments frozen.
Those who move voluntarily and are worse off won't get these top-up payments and could lose cash.
Those who miss the deadline and later make a claim may also not get this transitional protection either.
The clock starts ticking on the three-month countdown from the date of the first letter, and reminders are sent via post and text message.
There is a one-month grace period after this, during which any claim to Universal Credit is backdated and transitional protection can still be awarded.
The most recent data from the DWP shows 61,130 individuals have made a claim for UC, and 39,920 awarded transitional protection.
Another 40,540 are still in the process of moving to the new benefit.
What are Tax Credits?
Tax Credits are a type of state benefit. There are two different types: Working Tax Credit and Child Tax Credit.
Working Tax Credits are designed for those earning a low income from work.
Child Tax Credits are for those with kids who may or may not be working.
You can claim one or both tax credits.
Both aim to help households on lower incomes to cover everyday essentials.
The payment is made by the government to those who are eligible, depending on how much you earn, how many hours you work, whether you have kids (and their age).
Tax credits have been replaced by Universal Credit so you won't be able to apply for them if it's a new claim.
What is managed migration?
Universal Credit is replacing six benefits under the old welfare system, commonly called legacy benefits. They are:
- Working Tax Credit
- Child Tax Credit
- Income-based Jobseeker's allowance
- Income support
- income-related employment and support allowance
- Housing Benefit.
If you're on any of these benefits now, you can choose to move over at any time - but you might not be better off.
You should consider carefully what moving over means for your money, as you can't move back once you're on Universal Credit.
Using an online benefits calculator can help you compare and are free and easy to use from charities such as Turn2Us and EntitledTo, and it's also worth asking them for advice.
You may be moved over to Universal Credit if you have a change in circumstances, like moving home, a change in working hours or a have a baby.
But eventually everyone will be asked to moved over to Universal Credit.
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This is known as "managed migration" .
If you're invited to move over you may get transitional payments so that the amount you get stays the same in the short term.
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