Tax Credit Award Renewals – Changes

Every year HM Revenue & Customs (HMRC) renews around 5.8 million tax credits claims. This is one of the largest and most complex annual pieces of work that HMRC undertakes.  This year, HMRC is introducing a number of changes that are intended to make the experience easier for tax credits claimants.

PAYE Income Information

One of the most significant changes is that HMRC will now be using PAYE income information to calculate tax credits awards. Employers and pensions providers supply this information on their real time PAYE submissions. 

The tax credits claimant’s Renewals Notice will show the gross income information supplied for the year. The Notice may therefore include income from more than one employment.  

If the income amount shown on the Renewals Notice is too high or too low for any reason, it could result in an underpayment or an overpayment of tax credits. Therefore, in its guidance to claimants, HMRC stress that it is important they check the income details shown on the Renewal Notice are correct and that the claimant contacts HMRC as soon as possible if they think the income details are wrong. 

Employers and Pension Providers

It is envisaged, however, that employers and pension providers may receive an increased number of queries from employees as a result.  HMRC have published a ‘What’s New’ guide explaining what to do if an employee (or pensioner or annuitant) questions the income information shown. 

The ‘What’s New’ guide explains that the employer should:

• Ask the employee for details of the amount and date of the income information shown on the Renewal Notice;

• If practical, please compare this with the year-to-date figure in the employer’s records for that employee at that point in time;

• If the figure is correct, please explain this to the employee;

• If the figure is incorrect please ask the employee to phone the number on the Renewals Notice with the evidence of the correct income information;

• HMRC’s Contact Centres are aware that it is possible that the information on the Renewals Notice may be out-of-date, for example because the employer sent (or needs to send) updated information (for example on an Earlier Year Update). And that this is part of the normal process and does not mean that the employer is at fault;

• However, even if the employer and employee can’t understand why the figure is different the employee should still contact HMRC using the number shown on their Renewals Notice;

• Any calls to HMRC’s Contact Centre will refer it to a caseworker who will look into the matter;

• There is no need for the employer to contact HMRC’s Employer Helpline. HMRC will only contact the employer if there appears to be any issue with the employer’s submissions.  

Finally HMRC state that they have listened to stakeholder concerns that in some cases ‘duplicate’ PAYE records may result in some tax credits Renewals Notices being incorrect. HMRC state that they are aware of some instances of duplicate records which may compromise a correct tax credit renewal, they will take steps to remedy this as soon as possible.