Tax credits renewals

Overview of the renewals process

Each year, tax credit claimants were automatically sent a set of 'renewal' papers by HMRC, and so long as you did what you were asked within the time limits set out, the legislation treated you as having claimed again for the new tax year.

Although called a ‘renewals process’, the process actually did two things: it finalised your entitlement for the year just ended and compared it with what you had been paid, and it also renewed your tax credit award for the next tax year.

Now that the tax credits system has closed down, there are no tax credit awards after 5 April 2025. This means that no-one will renew their tax credit claim for the 2025/2026 tax year and so only the finalisation part of the process will take place.

Most previous tax credit claimants moved to universal credit or pension credit in 2024/2025 or earlier years and you should have finalised your tax credit claim shortly after making your claim for universal credit or pension credit. You will have also finalised your tax credit claim if you were invited to claim universal credit or pension credit but chose not to do so after 6 April 2024.

However, you may still need to finalise your 2024/25 tax credit claim if you:

• Were entitled to a nil award, which means you were entitled to tax credits but did not receive any payments due to your household income
• Were entitled to tax credits and received payments in 2024/2025 but were not eligible to move to universal credit or pension credit. DWP and HMRC did not issue migration notices or tax credit closure notices to people who would not be eligible for universal credit or pension credit.
• Were entitled to tax credits and received payments in 2024/2025 but your award ended mid-way through the tax year, for example because you separated from your partner or moved in with a new partner.

The finalisation process after 6 April 2025

Your award for 2024/25 will have been based on your circumstances for that year and, initially, your income for 2023/24. The finalisation process is needed to confirm your income and circumstances for 2024/25. Your award will be finalised by comparing actual income of 2024/205 with that for 2023/24 to finalise the entitlement for 2024/25.

The comparison works like this for finalising 2024/25 awards:

• If 2024/25 income is less than 2023/24 income by £2,500 or less, the final award is based on 2023/24 income and there is likely to be no change in the finalised award.
• If 2024/25 income is less than 2023/24 income by more than £2,500, the final award will be based on 2024/25 income plus £2,500. There is likely to be an underpayment.
• If 2024/25 income is greater than 2023/24 income by £2,500 or less, the final award, like the initial award, is based on 2023/24 income and there is likely to be no change in the finalised award. So an increase in income of £2,500 or less is disregarded (hence the £2,500 is commonly known as 'the disregard').
• If 2024/25 income is greater than 2023/24 income by more than £2,500 the final award is based on 2024/25 income less £2,500 and there is likely to be an overpayment.

Finalisation packs

HMRC will send you a review form. You need to read the instructions carefully. Most people will have their 2024/25 awards ‘auto-finalised’ based on the information HMRC hold. If you are in this group, you should check that the income figures HMRC hold are correct and let them know if anything is wrong, missing or incomplete. A small number of people will be required to provide information to HMRC by the deadline in the notice – this is called a reply-required.

  If your tax credits ended because you claimed universal credit or pension credit after receiving a notice from DWP and HMRC, or you have been invited and do not do so, then the process is different to that outlined on this page. See the heading in-year finalisation for more information.

You should carefully check which form you have received and follow the instructions as the process for renewing is different depending on which form you receive.

If you had more than one claim in the 2024/25 year, you might receive forms for each claim. It is important that you fill them all in.

If you have not received finalisation forms, you should contact HMRC.

If you are required to reply to HMRC, HMRC say that the deadline for replying is 30 days from the date on your finalisation notice. If you need to give HMRC an estimate of your 2024/25 income, you should do that before the date on the notice. You will then have until 31 October 2025 to provide your actual income.

Once you have completed the finalisation process, you should receive a 2024/25 final award notice. You have 30 days to appeal if you think anything on the notice is incorrect.

  WARNING: The deadlines for finalising your 2024/25 claim are different this year. Check your notice carefully. The usual 31 July deadline does not apply. 

Income information provided by HMRC

HMRC use information from the tax system (called ‘Real Time Information’) to help with the finalisation process. Employers and pension providers have to send data to HMRC electronically each time the pay their employees and HMRC collect that data together.

The letters you received from HMRC to finalise your claim might show the income figure that HMRC hold for the 2024/25 tax year from your employer(s) or occupational pension provider. There are a few things you need to be careful of with the income figures:

• You must check that the figure is correct and that your employer has not sent the wrong information to HMRC.
• You need to check that the figure is the right one for tax credits. Your employer may have sent the correct information to HMRC but not all income that employer’s report is taken into account for tax credits. For example, you might be able to deduct £100 a week for any weeks of statutory maternity, paternity, shared parental leave or adoption pay. You might have self-employed losses to set against your household income or have mileage allowance deductions, allowable work expenses or extra pension contributions. See our tax credits income section for more information or read the notes that come with your renewal form.
• The forms will only show one figure for employment – so if you have income from more than one employer it may be difficult to check.

If you think the income information is incorrect or that you can make some deductions from the figures, you should contact HMRC to ask them to change the income. If HMRC refuse to do so, you need to wait for the final award notice for 2024/25 and start the appeals process. See our appeals section for more information.

How to finalise your claim

You can finalise your claim by:

• phoning HMRC's tax credits helpline on 0345 300 3900 (NGT text relay if you cannot hear or speak on the phone: dial 18001 then 0345 300 3900.). HMRC's helpline opening times are shown on GOV.UK.
• sending your completed form back in the post. It is advisable to keep a copy and send it recorded delivery or ask for a proof of postage.

Missing the deadline

If you are required to reply to the notice and do not do so, we understand that HMRC will finalise your award for 2024/2025 based on information they hold. You will then receive a final decision notice which you can appeal and/or dispute within the usual appeal and dispute time limits.

Penalties

There may be financial penalties for not responding to a notice, or for giving the wrong information in response to it.

In-year finalisation

If you claimed tax credits in 2024/25 and you received a notice asking you to claim universal credit or pension credit, the normal end of year finalisation process will not apply to you and you will finalise your claim using different in-year finalisation rules. This applies even if you decided not to claim universal credit or pension credit in response to a notice from HMRC and DWP.

The in-year finalisation process is, in most cases, trying to establish your actual income received in the shortened award period (see below for if you have income from self-employment as the rules are slightly different). This is different from how your award will have been finalised in earlier years under the normal end of year finalisation processes and it may be different to the way your initial award was calculated for the current tax year. HMRC then adjust the part-year income to an annual figure and then re-calculate the income and award for the part-year period. It means that you could end up with an overpayment or underpayment due to the way the in-year process works even though you may have kept HMRC up to date with your income figures.

Calculating income for in-year finalisation 

If you are employed, it is likely that HMRC will use the earnings information they receive from your employer. HMRC will use the actual earnings you have received in the part-year award period (that is, from the start of the award to the date that the award ends). The finalisation pack from HMRC may ask you to simply check the figure or it may ask you to provide the figure yourself.

You should add up any pension; investment; property; foreign; notional income that you received in the part-year award period and tell HMRC about anything that is over £300.

If you have any social security income or student income to declare, you need to tell HMRC about the actual amounts you have received in the part-year award period:

Contributions to approved pension schemes that you have actually paid in the part-year award period and authorised gift aid payments that you have paid in the part-year award period can be deducted. For example, if the tax credits claim is between 6 April 2024 and 30 November 2024 and then the universal credit claim is from 1 December 2024 – you can only deduct any pension contributions you actually paid between 6 April 2024 and 30 November 2024 when working out your income for tax credits. Any pension contributions paid from 1 December 2024 should be taken into account by DWP when calculating your universal credit.

Calculating self-employed income

The process of calculating income from self-employment under in-year finalisation is more complicated because most self-employed claimants will not know their actual income until much later. It would be very difficult for self-employed claimants to tell HMRC their actual income and expenses for a part year period and doing this would lead to unfairness for people who have fluctuating earnings from self-employment.

In recent years, for trading income under in-year finalisation, HMRC have accepted either actual figures (where possible) or a reasonable estimate of taxable profits for the basis period that ends in the tax year that you move to universal credit. As a result of basis period reform in the tax system, HMRC amended the tax credit rules from 6 April 2024 to change how income is calculated from self-employment during in-year finalisation. Unfortunately the rule changes are not clear and are difficult to apply in practice. Our understanding is that HMRC want self-employed claimants to report their part year income from self-employment (between the 6 April and the date tax credits end) as accurately as possible. This may need to be based on an estimate of trading income for the 2024/25 tax year. We advise all self-employed claimants to contact HMRC before completing their in-year finalisation form to ensure the correct figure is used.