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HMRC internal manual

Tax Credits Technical Manual

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HM Revenue & Customs
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Changes in circumstances: Changes in circumstances that should be notified (non-mandatory)

Tax Credits (Claims and Notifications) Regulations 2002, Reg 25

Some changes may result in an increase in tax credits, while others may result in a decrease and result in an overpayment.

Except for certain circumstances (TCTM05300) any increase can only be backdated for up to 1 month. Any reduction in tax credits will usually be backdated to the date of change. However in certain circumstances the claimant may continue to be entitled to a ‘run on period’ of tax credits for example if the claimant’s job ends or they cease to undertake work for the required number of hours, at least 16, 24 or 30 per week or if childcare costs have reduced by more than £10.00 per week.

Claimants should notify the changes as soon as possible. For types of changes that must be notified see TCTM05100.

The following are the types of changes that should be notified

Changes in the number of children the claimant is responsible for

For example

  • When a baby is born or placed with a family for adoption
  • A child or qualifying young person joins a family

A qualifying young person starts or stops full time education or approved training

Regulation 5 of the Child Tax Credit Regulations 2002 prescribes that HM Revenue & Customs should be notified if:

  • A young person returns to full time non advanced education or approved training before they reach 20 provided they started, were enrolled or accepted on that course before they reach the age of 19.

Changes in Childcare

Regulation 16 of the Working Tax Credit (Entitlement and Maximum) Regulations 2002 prescribes that a change of circumstances occurs if a claimant:

  • starts paying for registered and approved childcare and is now able to claim help with the cost of childcare through WTC, or
  • already gets help with costs for childcare through WTC and the weekly childcare costs go up by £10 a week or more, or by an average of £10 a week or more. For details on how to calculate the relevant change including variable costs see TCTM02660.

Changes in Employment

A change of circumstances occurs if:

A claimant changes their employer. If the claimant qualifies for WTC their entitlement will continue as long as their change of employment is within 28 days.

Changes in income - Income increase disregards and income decrease disregards

Tax credits awards are based on annual income. Initially, tax credits awards are based on annual income for the previous tax year, that is to say awards for the year 2014/2015 will be based on income for the tax year 2013/2014. But note, initially, awards for the tax year 2003/2004 were based on the annual income for the year to 5 April 2002, nevertheless the same rule applies.

The amount of tax credits can change if a claimant’s income (for couples this is joint income) in the year to 5 April 2015 is different from the claimant’s income in the previous year.

Claimants should notify the following changes of income:-

  • If income for the year to 5 April 2015 is expected to be less than the income to 5 April 2014 (by more than £2,500), the claimant may be entitled to extra tax credits
  • If income for the year to 5 April 2015 is expected to be more than £5,000 higher than income for the year to 5 April 2014, the claimant may get less tax credits.

Claimants should still notify a change (although it is not mandatory) if they expect their income for the year to 5 April 2015 to be no more than £2,500 lower than their income for the year to 5 April 2014. It will make no difference to the amount of tax credits they will receive for the current year but the decreased income will be taken into account in the following year.

Claimants should still notify a change (although it is not mandatory) if they expect their income for the year to 5 April 2015 to be no more than £5,000 higher than their income for the year to 5 April 2014. It will make no difference to the amount of tax credits they will receive for the current year but the increased income will be taken into account in the following year.

For examples of income increase disregards and increase decrease disregards see TCTM07042.

Note - income increase disregard

Before 6 April 2006, claimants should still have notified a change if they expected their income to be no more than £2,500 higher than their previous year’s income.

From 6 April 2006 to 5 April 2011, claimants should still have notified a change if they expected their income to be no more than £25,000 higher than their previous year’s income.

From 6 April 2011 to 5 April 2013 the income increase disregard was lowered to £10,000.

From April 2013 the income increase disregard was lowered to £5,000

Note - income decrease disregard

From 6 April 2012 an income disregard of £2,500 for falls in income was introduced.

Other changes of circumstances

HM Revenue & Customs should also be notified if the claimant, partner or child or young person they are responsible for becomes or stops being disabled or severely disabled.

This is because they may become entitled to, or stop being entitled to the disabled or severely disabled elements of the tax credits.