Changes in circumstances for tax credits

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Changes in circumstances for tax credits
  • What is a change in circumstance?
  • Reporting changes in circumstances

The payment of tax credits is based not just on the income of the household but also the circumstances of those people included in a tax credit award notice. This includes the children or qualifying young persons as well as the claimants.

Therefore, when advising a client regarding tax credits, it is important that you have a thorough understanding of the circumstances which might affect a claim. For example, this could be whether there are any disabilities in the household, or childcare payments which may impact on the level of the tax credit award.

In most cases, your client’s personal circumstances will not change during the year, although the annual household income will vary.

When changes occur, it is important that the Tax Credit Office is notified within the required deadlines, otherwise the claimant may lose entitlement to tax credits for the period for which notification was not made.

Changes that result in a reduction in entitlement to tax credits will be backdated to the date of the change, whereas any change that results in an increase in the tax credit award can, in most cases, only be backdated by a maximum of 31 days.

What is a change in circumstance?

The main types of change that could affect a tax credit award are:

  • changes in the number of adults in the household (for example if a couple breaks up or two people begin living together as a couple, or a claimant leaves the UK or dies)
  • changes in eligibility to the elements of tax credits (for example, the arrival of a new child or qualifying childcare)
  • changes in the number of hours a claimant works (for example, when he stops working at least 16 or 24 hours

More on Tax credits: