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Universal Credit (UC) is gradually replacing tax credits, and some other social security benefits. Universal credit is now available across the UK and HMRC state that it is no longer possible for anyone to make a brand-new claim for tax credits. The only exception is for certain people who are granted refugee status. Instead, people are expected to claim UC or pension credit depending on their circumstances.  Currently, existing tax credit claimants can continue to renew their tax credits and/or add extra elements to their claim. See our existing tax credit claimants page for more information. Our understanding is that the majority of existing tax credit claimants will move to either universal credit or pension credit by the end of the 2024/25 tax year. You can find out more about this in our universal credit section. 

Updated on 6 April 2024

Changes of circumstances

Your tax credit award is based on your annual income and your circumstances at the time you claim or renew your claim. If your circumstances change during the award period, it can affect the amount you are entitled to.

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Most people have some changes during the year. For people claiming tax credits, some of those changes can affect the amount of a tax credit award, increasing or decreasing it. Other changes don’t affect the award amount but should still be reported to HMRC so they can keep their records correct.

When to report changes

Some changes must be reported to HMRC, these are changes that are likely to reduce a tax credit award. You must do this within one month of the change (or from when you became aware of the change).

If you don’t do this on time, HMRC may charge you a £300 penalty. Also, if you fail to report a change during the tax year and then confirm the incorrect information as part of the renewal, the penalty could be up to £3,000. Overpayments will start to build up from the date of the change if there is a decrease in your award as a result.

You should report changes that increase your tax credit entitlement as soon as possible and, again, no later than 1 month from the change otherwise you may miss out on money.

Changes that must be reported to HMRC

There are some changes that you must report.

HMRC's full list of changes that must be reported is on the GOV.UK website.

Other changes to report

These changes should be reported to HMRC as soon as possible

  • You have a new baby, or a new child joins your household
  • you or someone you are claiming for, starts or stops getting a disability benefit (for example, disability living allowance (DLA) or personal independence payment (PIP))
  • You or someone on your claim, starts or stops getting the highest rate of DLA Care,  the enhanced rate daily living component of PIP or the higher rate daily living component of Scottish disability assistance; or a child included in your claim starts or stops getting one of the qualifying benefits for a disabled child element.
  • You start paying childcare costs and you want to claim the childcare element
  • Your childcare costs go up by more than £10 a week for four weeks in a row
  • Your normal working hours or paid work increase to 30 (or more) a week.

You are likely to have an overpayment if the change means you are entitled to less tax credits than you have been getting. Any change that reduces the amount of tax credits you get will usually take effect from the date the change happened.

You are likely to be underpaid if the change means that you are entitled to more tax credits than you have been getting; the extra money can only be paid from up to one month before the date the change is reported.

From 6 April 2017 onwards, a child element of child tax credit will not be included with the award for 3rd and subsequent children born after 5 April 2017, although there are exceptions to this rule. It is important that you still tell HMRC when you have  another child or when a child joins your household or when a child leaves your household, even if you do not get a child element for them so that HMRC can keep their information up to date and make sure your tax credit payments are correct if there are any other changes that may happen. The disabled child rates of the child element and the childcare element are not affected by the 2 child limit rule and are included for any number of children in your claim where the qualifying conditions are met.

Changes that don’t affect the award

It is important you tell HMRC about any changes to your address or bank account information as soon as possible to make sure their records are up to date and avoid any delays in your payments or receiving any letters.

Universal credit and changes

Where you have to report a change that ends your tax credits award, for example moving in with a new partner or permanently separating from your existing partner, then this might mean you will have to claim universal credit (or pension credit, depending on your age) if you still want to claim support. This is because HMRC state it is no longer possible to make brand new claims for tax credits. The only exception to this is for certain people who are granted refugee status.

Changes in income

The way the rules work means you do not actually have to tell HMRC about changes to your annual household income until the end of the tax year when the claim is being renewed and any changes in income will be taken into account at that stage. However, if you tell HMRC about any income changes as they happen, it means any changes to your award can be kept up to date and you reduce the risk of being overpaid or underpaid during the tax year. The income disregard was reduced to £2,500 from 6 April 2016 which means that any rises in income of more than £2,500 from one year to the next will likely lead to an overpayment if you wait until the end of the year to tell HMRC.

HMRC often use information about earnings provided to them by employers (Real time Information – RTI) so if the information suggests your earnings are changing by more than £2,500 during the year, HMRC may amend your award to try and prevent an under or over-payment by the end of the tax year. If they do this, they will contact you.

Notifying changes

You have to tell HMRC about any changes that may affect your tax credits. Even though other parts of HMRC (or DWP) may already have the information, you cannot rely on HMRC updating information from, say, your income tax records through to your tax credit records. Sometimes, HMRC will use information they already have about you to amend your award because it is helpful to do so but the way the rules are written means that you are still responsible for giving the information to HMRC for your tax credit claim. This includes if you stop working and start claiming universal credit, you should still tell HMRC you have stopped working.

You can either tell HMRC using either HMRC’s on-line service, via the HMRC app, by calling HMRC’s tax credit helpline or by writing to HMRC.

If you call HMRC’s tax credit helpline, make sure you make a note of the date and time of the call and the name of the person you speak to. It is also a good idea to confirm the change in writing, keeping a copy of the letter as proof that you have advised HMRC of the change. Letters can be sent recorded delivery, but at the very least get proof of posting.

You can notify most changes to HMRC online using HMRC’s tax credits manage your tax credits service, via the GOV.UK website. You can also reach the ‘manage your tax credits’ service through your personal tax account and following the tax credit links.

If you have a smart phone (iphone or android) you can also use the HMRC app to notify many kinds of changes, check payments and complete your renewal during the renewal period. The HMRC app is free to download.

If the change affects the amount of your tax credit award, HMRC should send you a new decision letter (called an award notice), giving details of any changes to your payments and how these have been worked out. This normally takes up to three weeks but if you have not received the after that time, it is worth contacting HMRC to chase it up. You should always check the award notice carefully to make sure that the change that you reported has been correctly recorded. If it has not then you must tell HMRC within 30 days that your award notice is wrong, otherwise you may become responsible for any overpayments that may arise as a result of the mistake.

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