Tax credits

The Cost of Living support package has been designed to help over 8 million households in receipt of mean tested benefits. The details for Cost of Living Payments due in the 2023-24 tax year were published earlier this year and have recently been updated.

Eligible recipients will receive up to three Cost of Living Payments of £301, £300 and £299 during the course of the current tax-year. This includes those receiving pension credit, and these payments will be made separately from other benefit payments. The first payment of £301 was made between April-May 2023.

HMRC has confirmed that around 840,000 families, who receive tax credits and no other qualifying benefits, will receive their £300 autumn Cost of Living second Payment between 10 and 19 November 2023. These payments are made automatically. Any individuals who expected a payment but did not receive one are asked to wait until after 20 November to contact HMRC. This is to allow time for their bank, building society or credit union to process the payment. 

In addition, more than 7 million eligible UK households are receiving £300 directly from the Department for Work and Pensions (DWP) between 31 October and 19 November 2023.

Pensioner households will also receive £300 which will be paid as a top up to those eligible for the Winter Fuel Payment in November and December. Combined with the one-off Cost of Living Disability Payment earlier this year, relevant households will receive £1,350 in total.

The third Cost of Living Payment of £299 is due to be paid in spring 2024.

The 31 July 2023 is the final day for families and individuals that receive tax credits to tell HMRC about any changes in their circumstances or income and to renew their tax credit application. As in previous years, there is likely to be a last-minute rush and it may be difficult to contact HMRC by phone. Renewing a claim online (either on the HMRC APP or GOV.UK) is the preferred method. It is also possible to renew by post or phone. There are still some 300,000 claims that need to be renewed.

Once the deadline has expired, anyone who has not yet renewed their tax credits should still ensure they do so as soon as possible as otherwise their payments may be stopped, and monies received since last April may have to be repaid. We would strongly advise any of our readers who have not yet renewed their tax credits application to do so as a matter of urgency.

Over 1.5 million renewal packs were sent out by HMRC between early May and mid-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, and no further action is required.

Taxpayers should notify HMRC where there have been changes to the living arrangements, childcare costs, number of hours worked and salary (increase or decrease). 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.

Universal Credit is expected to replace tax credits and other legacy benefits (including Income-Related Employment and Support Allowance, Income-Based Jobseeker’s Allowance) by the end of 2024.

Fraudsters often try to take advantage of the 31 July deadline for submitting tax credits renewal information. 

The fraudulent emails, texts or calls claim to be from HMRC and often promise money back in the form of a tax rebate together with a click-through link to a replica of the HMRC website. The fraudsters then try and steal personal details such as bank or credit card details of unwitting recipients who in some cases even transfer money for a bogus overpayment. 

As the deadline approaches, HMRC is warning around 1.5 million tax credits customers to be alerted to scams that mimic government communications to make them appear genuine. In the 12 months to 30 April 2023, HMRC responded to more than 170,234 referrals of suspicious contact from the public. More than 68,437 of these offered bogus tax rebates.

Typical scam examples include:

• emails or texts claiming an individual’s details aren’t up to date and that they risk losing out on payments that are due to them;
• emails or texts claiming that a direct debit payment hasn’t ‘gone through’;
• phone calls threatening arrest if people don’t immediately pay fake tax owed;
• claims that the victim’s National Insurance number has been used in fraud; and
• emails or texts offering spurious tax rebates or bogus grants or support.

HMRC’s Director General for Customer Services, said:

‘Tax scams come in many forms and we’re urging customers to be alert to the tactics used by fraudsters and never to let yourselves be rushed. If someone contacts you saying they’re from HMRC and asks you to give personal information or urgently transfer money, be on your guard. Search ‘HMRC scams’ advice on GOV.UK to find out how to report scams and help us fight these crimes.’

Universal Credit is expected to fully replace tax credits, and other legacy benefits (including Income-Related Employment and Support Allowance, Income-Based Jobseeker’s Allowance) by the end of 2024.

HMRC is currently sending the annual tax credit renewal packs to some 1.5 million tax credit claimants and is encouraging recipients to renew their tax credits claim online. HMRC started writing to taxpayers on 2 May and expects all packs to be with recipients by the 15 June 2023. 

A renewal is required if the pack has a red line across the first page and it says, 'reply now'. Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2023. Claimants who do not renew on-time may have their payments stopped. Around 500,000 taxpayers are expected to receive these packs and can renew their tax credits via GOV.UK or on HMRC’s app.

If the renewal pack has a black line across the front page and says ‘check now’, then you will need to check your details are correct. Taxpayers need to notify HMRC where there have been changes to the family size, childcare 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.

Universal Credit is expected to fully replace tax credits, and other legacy benefits (including Income-Related Employment and Support Allowance, Income-Based Jobseeker’s Allowance) by the end of 2024. This means that claimants who receive tax credits will receive a letter from the Department for Work and Pensions (DWP) telling them when to claim Universal Credit.

There has been a 10.1% increase in twelve Scottish government grants that are delivered through Social Security Scotland. Seven of these benefits are only available North of the border.

The Scottish Social Security Minister said the following:

“We are committing £5.2 billion for social security benefits in 2023-24, providing support to more than one million people in Scotland. This is £776 million above the level of funding we are forecast to receive from the UK Government for social security through Block Grant Adjustments.

“The choices we have taken in our Budget represent a significant investment in people and are key to our national mission to tackle child poverty. They will help low-income families with their living costs, support people to heat their homes in winter, and enable disabled people to live full and independent lives. This is money that will go directly to people who need it the most.”

The benefits that have increased are:

• Child Winter Hearing Assistance
• Carer’s Allowance Supplement
• Young Carer Grant
• Job Start Payment
• Best Start Grant Early Learning Payment
• Best Start Grant School Age Payment
• Adult Disability Payment
• Child Disability Payment
• Best Start Foods
• Best Start Grant Pregnancy & Baby Payment
• Funeral Support Payment
• Winter Heating Payment

In addition, the Scottish Child Payment increased to £25 per week from 14 November 2022. The payment is available to qualifying applicants living in Scotland for children under the age of 16. This represented a 150% increase in eight months.

HMRC is currently sending the annual tax credit renewal packs to some 2.1 million tax credit claimants and is encouraging recipients to renew their tax credits claim online. HMRC started writing to taxpayers at the end of April and expects all packs to be with recipients by 27 May 2022. 

A renewal is required if the pack has a red line across the first page and it says, 'reply now'. Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2022. Claimants who do not renew on-time may have their payments stopped. Around 630,000 taxpayers are expected to receive these packs and can renew their tax credits via GOV.UK or on HMRC’s app.

If the renewal pack has a black line across the front page and says, ‘check now’ then you will need to check your details are correct. Taxpayers need to notify HMRC where there have been changes to the family size, childcare 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.

Taxpayers are not required to report any temporary falls in their working hours as a result of coronavirus. They will be treated as if they are working their normal hours until the Coronavirus Job Retention Scheme closes.

Universal credit is expected to fully replace tax credits, and other legacy benefits (including Income-Related Employment and Support Allowance, Income-Based Jobseeker’s Allowance) by the end of 2024. HMRC restarted their managed migration process on 9 May 2022. This process was paused during the pandemic. This means that claimants will gradually be notified when required to move to Universal Credit. This process is due to be completed by 2024. Claimants can also elect to move from tax credits to Universal Credit if they would be financially better off. An independent benefits calculator can be used to check.