HMRC are in the process of sending 2.1 million annual renewal packs to tax credit customers. The Annual Tax Credit Packs will be distributed between 25th April and 27th May. Recipients will have until 31st July to ensure their details are correct and update HM Revenue and Customs if there are any changes in their situation. Tax Credits are aimed at assisting working families with specific financial support. It is therefore essential for people receiving the packs to ensure they don’t miss out on money that may be entitled to.
It is estimated 630,000 people will be required to confirm their circumstances to allow them to renew their tax credits for the 2022 / 2023 Tax Year.
What Are Tax Credits?
There are two types of tax credit – working tax credit and child tax credit. Working tax credit is given to people who are on a low income, regardless of whether they are self-employed. Child tax credit is given to people who have children. You do not have to be working to get it and it is in addition to child benefit. Eligibility for each tax credit is different.
They are classified as a benefit and they are calculated as an annual amount over the course of a tax year. They are paid in weekly or monthly payments across the tax year. What makes they different from other benefits is the fact they are paid out by HMRC. Other benefits, including the likes of Universal Credit, are generally dealt with by the DWP (Department for Work and Pensions)
How do Tax Credits Work?
In a nutshell, the amount of tax credits a person may be entitled to is dependent on a number of factors. These include: –
- The total amount of taxable income a person and their partner. This includes income for the current tax year and previous tax year);
- The number of hours a person works;
- The amount that is payable for childcare;
- If a person or their partner has any long-term health problems or disability;
- Passing residence and immigration critera.
Tax Credit – The Annual Cycle
Unlike other benefits, Tax credits follow an annual cycle based on the Tax Year. This is from 6th April to 5th April the following year. The key components of the annual cycle include:
- Claims starting
- Claims changing
- Claims finishing
Types of Renewal Packs
There are two types of renewal packs to be aware of:
If the pack has a red line across the first page and states ‘Reply Now’ the recipient will be required to confirm their circumstances to be able to renew their tax credits.
If the pack has a black line across the first page and says ‘Check Now’, recipients must check their details are correct. If they are still correct, the recipient is not required to do anything. Their tax credits will be renewed automatically.
How Do People Renew Their Tax Credits
People can renew their tax credits on the HMRC app or via the gov.uk website. The process is straightforward and relatively quick. HMRC have produced a video on YouTube which explains the process.
Click here for more information on managing your tax credits.