What are tax credits?
Tax credits are payments from the government designed to help with the cost of living.
You may be able to claim them if you work but are on a low income (working tax credit), or if you have children that live with you (child tax credit).
The amount you receive in tax credits will depend on a number of factors including your how much you earn, how many hours you work, who you live with, how much you spend on childcare (if you have a family) and whether you receive any benefits.
It's for this reason that you need to renew your tax credits each year to make sure that the amount you are paid is correct.
If your application for tax credits is refused one year but your circumstances change it's worth applying again. Similarly, if you've never checked whether you are eligible for tax credits it could be well worth your while.
Who needs to renew tax credits?
If you submitted a claim for tax credits during the last tax year (between 6th April, 2014 and 5th April, 2015) you will need to renew, or review your tax credit entitlement.
This applies irrespective of whether you received tax credits for the whole year, for part of the year, or if you had your claim for tax credits refused.
If you made a claim for tax credits last tax year then you will be sent a tax credit renewal pack; if you made multiple claims you'll be sent one tax credit renewal pack for each.
This pack with either be:
an A5 brown envelope containing an Annual Review notice (TC603R)
an A4 white envelope containing an Annual declaration (TC603D or TC603D2) and an Annual Review notice (TC603R)
If you receive the white envelope containing the Annual declaration you need to renew your tax credit entitlement as soon as possible.
If you receive the brown envelope you simply need to review the details HMRC have included. If they are correct then you don't need to do anything else. However, if your circumstances have changed or if there are any errors on the form you need to notify HMRC as this will affect your entitlement.
You need to review your Annual review notice even if you don't intend to claim tax credits this tax year.
When will I get my renewal pack for tax credits?
HMRC start to send out tax credit renewal packs in April and the last ones are sent by 28th June. Generally the white envelopes containing the Annual declaration forms are sent out first followed by the brown envelopes containing the Annual review notices.
If you haven't received a tax credit renewal pack by the end of June and think you should have, you must contact the Tax Credit Helpline to request that the forms be sent to you.
When do I need to renew my tax credits by?
Once you receive your tax credit renewal pack you have until 31st July to renew your entitlement, or report any changes that affect your circumstances.
You can either do this by completing your Annual declaration form and sending it back to the tax credit office, by calling the Tax Credit Helpline (0345 300 3900) or by renewing online.
If you opt for the latter you need to bear in mind that the Tax Credit Helpline gets incredibly busy towards the end of July and getting through to speak to an advisor can become difficult. As such it makes sense to either submit your tax credit renewal by post, or call as soon as you receive your pack.
Some renewal packs will specify a different deadline so you must check to make sure you get yours in on time.
If you need any help completing your tax credit renewal you can take your pack to your nearest Citizens Advice Bureau and they'll be able to assist.
How long does it take for tax credit renewals to process?
Once you've submitted your tax credit renewal, or informed the Tax Credit Office of any changes to your circumstances you should receive a reply within 8 weeks. This will be in the form of an award notice which will confirm whether you have been overpaid or underpaid tax credits during the past tax year.
You will also receive an award notice showing your payments for the coming year, providing your circumstances remain the same.
You should check the details on both forms carefully and contact the Tax Credit Office if you notice any errors.
What happens if you don't renew your tax credits?
If you've been sent an Annual declaration form (white envelope) and don't renew your tax credits by 31st July your payments will stop.
If this happens you only have 30 days to contact the Tax Credit Office with the information they've asked for or you'll need to submit a new tax credit claim and start the process again. You may also be asked to repay anything you've received since 6th April this year.
You will also be asked to pay back any overpayments you've received in the last tax year. If you haven't kept HMRC up to date with your circumstances this could represent a substantial outlay.
What happens if you don't report changes to your circumstances?
If your circumstances have changed over the past year, or if they change over the coming tax year, it's essential that you inform HMRC so that your tax credit payments can be amended.
Once you notify them of a change, HMRC will calculate whether you are receiving too much, or too little in the way of tax credits and adjust your payments accordingly.
If you don't inform HMRC of any changes that affect your entitlement and get paid too much tax credit you will be asked to return any overpayments you've received to them on or after renewal. It's for this reason that keeping them up to date makes so much sense.
These changes include if your living circumstances, your job or your working hours change; see the Gov.uk website for a full list.
What happens if I have been overpaid tax credits?
If you been overpaid tax credits you will be asked to repay the money. This can happen if you fail to renew on time, make a mistake on your form or fail to inform HMRC of a change in your circumstances.
You can choose to do this by making a direct payment, or by having your ongoing payments reduced until you have cleared what you owe. If you have stopped receiving tax credits, you will have to make a payment. Your options are explained on the Gov.uk website.
You can appeal if you think their calculations are wrong and you need to do this within 30 days. There's more information about how to appeal on the HMRC website.