Have you received an additional letter about your tax credit renewal from HMRC?

What is the renewals process?

Tax credit awards last for a maximum of one tax year (6 April to following 5 April). When you claim, your award is based on your circumstances for the year you claim and your income for the previous tax year. This is your initial award and the payments are provisional.

After the tax year ends, HMRC use a ‘renewals process’ to ask for your actual income and to confirm your circumstances for the tax year just ended. This allows them to finalise your entitlement for the year just ended and to set up your claim for the new tax year.

The renewal papers are usually sent out between end of April and June. The papers sent out recently are finalising entitlement for the 2019/20 tax year and setting up claims for the 2020/21 tax year.

How are claims renewed?

There are two ways for claims to be renewed:

Auto-renewal: This is where HMRC use information they already hold to calculate your final entitlement and to set up your new claim for the new tax year. If you don’t contact HMRC by 31 July to tell them something on the notice is wrong, missing or incomplete, HMRC will make the decisions set out on your notice but your claim will be automatically renewed. This is normally used in more straightforward cases such as where HMRC already have information from your employer or pension provider about your income.

Reply-required: This is where HMRC write to you and ask you to fill in a declaration form – either on paper, over the phone or online – by 31 July. The form will ask you to confirm your 2019/20 income, tell them if it is an estimate only and check the circumstances HMRC hold about you. HMRC will then make a final decision and send you a final notice for 2019/20 and an initial award notice for 2020/21. If you don’t complete your renewal by the specified date (31 July), your claim is not automatically renewed and your payments will stop.

Which claimants receive an auto-renewal?

In previous years, only certain people had their claims automatically renewed. Usually this was in cases where HMRC already have information from the tax system provided by your employer or pension provider (and no exceptions apply), you are entitled to only the full family element of child tax credit, you have entitlement but no payments are made due to the level of your income or you were in receipt of certain means-tested benefits for the whole tax year.

Otherwise, HMRC would ask claimants to tell them about their income for the year just ended by completing a renewals declaration.

How do I know if my renewal is an auto-renewal?

You will receive one document- called a TC603R- that says ‘Annual Review for year ended 05/04/2020’. It will include a paragraph that is similar to the following:

‘We will decide on 31/7/2020 that:

• The final amount of your tax credits award for the period 06/04/2019 to 05/04/2020 is £X.XX.
• Your tax credits award for 2020-2021 will be as shown in the payments

You can also identify an auto-renewal by a black line across the first page. If it is red line, that suggests it is a reply-required renewal.

'The image below shows what an auto-renewal notice looks like (please note this is from a previous year, so the dates will be different).

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My circumstances have changed/my tax credits have already stopped – do I need to renew?

Although everyone uses the term ‘renewals process’ for some people, whose tax credit awards have already ended, they will not renew their claims. Instead they will only need to finalise their entitlement for 2019/20.

If you receive any notice from HMRC that asks you to check details, you must check it carefully even if you are no longer receiving tax credits. Otherwise HMRC will finalise entitlement for 2019/20 on the information they hold which may be incorrect. This could lead to an overpayment or underpayment.

Why is my renewal different this year?

Due to the coronavirus pandemic, HMRC decided to automatically renew the majority of tax credit claims this year. This means that people used to getting a normal reply-required renewal and complete a declaration, have received a different notice. Unless they contact HMRC by the 31 July, HMRC will use the figures they hold to finalise entitlement for 2019/20 and set the initial award for 2020/21.

What do I need to check on my auto-renewal notice?

You need to check:

1. Whether the personal circumstances that HMRC based your claim on at the start of the award are correct
2. Whether any changes made to your claim during the award period are as shown. If any changes are missing, or you haven’t told HMRC about a change, you must contact them
3. Check the income details shown on the notice (see below if there are no income details shown).

You can use the TC603R notes to help you check.

Where do HMRC get the income information used in auto-renewals?

HMRC only have information about income for 2019/20 in certain cases. They usually have this information for employees and pension providers who send data about earnings and pensions to HMRC for tax purposes.

HMRC don’t have up to date information about income such as from self-employment, taxable social security benefits, other types of income (e.g. dividends, property income) and some benefits in kind.

They also don’t know about certain deductions that people might be able to make from their income figures such as some pension contributions, statutory payments, certain work expenses.

However, in order to auto-renew these claims, HMRC have to use an income figure to calculate the final entitlement for 2019/20. Our understanding is that they will use a figure that is based on 2018/19 income or estimates provided by the claimant during the 2019/20 tax year. It may have a small amount of up-rating applied. In some cases this income figure may not be accurate and so you must check it carefully.

What are provisional payments?

Tax credit claims last for a maximum of one tax year. However, HMRC don’t want to stop payments after 5 April each year and so they continue making provisional payments. These provisional payments have a special status because HMRC are using their discretion to pay them and they can be varied or stopped at any time. Until the renewals process is complete, no actual claim exists for the new tax year.

Why have I received a letter from HMRC about my renewal?

As explained above, HMRC decided to auto-renew most claims this year due to the coronavirus pandemic. Auto-renewal notices should show two figures:

• The final amount/entitlement that will be awarded on 31 July for 2019/20
• The initial award amount for 2020/21

The circumstances and income figures used to calculate these two figures should also be shown on the notice. Unfortunately, around 1 million people received renewal notices which did not include the income used to calculate these two figures. If no income figure is shown on your notice, it does not mean HMRC did not take any income into account, it just means they have not shown the figure they used in the calculation on your notice.

The renewal form instructs claimants to check the income used and tell HMRC if it is incorrect – but as there is no income figure on the form it cannot be checked by claimants.

To correct this, HMRC are sending extra letters to people (from 23 June) which show the total household income that HMRC will use to finalise the entitlement for 2019/20 on 31 July. This same figure will also be used to set the new tax credit award for 2020/21.

This error will not affect your tax credit provisional payments. They should continue in the usual way.

The income figure is missing from my renewals notice but I haven’t received a letter?

If you already contacted HMRC in response to your original renewals notice to confirm your income figure for 2019/20, HMRC say they will not have issued a letter to you. They say your claim will be finalised using the information you gave them and they should issue you a final award notice for 2019/20 and initial award for 2019/20 in the coming weeks. We are currently considering this situation further.

If you:

• Received an auto-renewal notice (see above on how to identify an auto-renewal)
• The notice asks you to check your 2019/20 income is as shown on the notice
• No income is listed for 2019/20 or only some of your income is listed
• You have not received a letter from HMRC showing the missing income figure by 1 July 2020

Contact HMRC immediately on 0345 300 3900 (NGT text relay if you cannot hear or speak on the phone: dial 18001 then 0345 300 3900) or use the webchat function on GOV.UK.

What should I do if I have received a letter?

Check the total household income figure carefully. If you have more than one type of income, or both and your partner have income, you should be aware that the letter will not break down the income figures used to get to the total household income figure. If you have any questions about what is included in the total figure, you will need to contact HMRC on 0345 300 3900 (NGT text relay if you cannot hear or speak on the phone: dial 18001 then 0345 300 3900) or use the webchat function on GOV.UK.

Use the renewal notes online to find out what income you need to include. HMRC may not know about all of your income sources. You should also check if you can make any deductions from your income figure. If the amount is incorrect, you must contact HMRC via webchat, via telephone or by completing your renewal online.

I don’t recognise the income figure on my renewal notice or letter.

You should contact the 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) or use the webchat function on GOV.UK.

I don’t know my actual income figure for 2019/20 yet

Sometimes people do not know their actual income figure yet for the tax year that has just ended. This is often the case for self-employed tax credit claimants. Usually, such claimants will declare an estimated income to HMRC by 31 July and then confirm their actual income by the following 31 January.

Because most people will have their claims auto-renewed this year, HMRC will treat the income figure as your actual income figure to finalise the claim by 31 July unless you contact them to tell them that your income is only an estimate at this point. Even if the income figure on the renewals notice or the letter you receive matches your own estimate, you must still contact them and ask them to mark it as an estimate. If you don’t, the claim will be finalised and you won’t be able to give HMRC your final income at a later date.

HMRC already know my income information – do I need to do anything else?

Even if the income information on your renewal notice or letter looks correct – you should check it carefully and check to see if you can make any deductions from your income. Often people do not realise they can make deductions for things such as certain work expenses, some pension contributions, gift aid contributions and statutory payments. Use the renewal notes to help you. We also explain deductions on our website for advisers.

What deductions can I make from my income figures?

We explain the deductions you can make on our website for advisers.

I have already told HMRC my 2019/20 income figure. Do I need to do anything else yet?

No, if you have already told HMRC your 2019/20 actual income figure, they should use that to finalise your award. This may take up to 8 weeks and you should receive a new final award notice for 2019/20 and an initial award for 2020/21.

I have told HMRC my 2019/20 income figure but I made a mistake – what do I do?

If you have already told HMRC your actual 2019/20 income but think it is incorrect, don’t worry. As long as you contact them by 31 July, they can change it.

Will I receive a final award notice my claim is automatically renewed?

In some cases – NO.

The auto-renewal notice acts as the final award notice for 2019/20 and the initial award notice for 2020/21. It shows you the decision that HMRC will make on (or shortly after) 31 July 2020.

Only if you contact HMRC to tell them any of the information (circumstances or income) is wrong will you get a new final award notice (and new initial award for 2020/21).

My hours have changed due to coronavirus – does that affect my renewal?

Special rules have been introduced to help tax credit claimants during the coronavirus pandemic. Broadly, those who are furloughed, on unpaid leave, shielding or who have had their hours reduced temporarily due to coronavirus will be treated as working the hours they were before the coronavirus pandemic started. This includes people who are self-employed and have temporarily had to stop trading or reduced their hours. You will not need to report any changes to working hours as part of your renewal.

However, if your hours reduce permanently, you are made redundant or you are self-employed and you stop trading completely (and don’t intend to re-start) then you must report it as a change of circumstances as usual.

Where can I find out more about tax credit renewals?

We have some information about the renewals process for claimants in the tax credits and benefits section of the LITRG website. For more detailed guidance, see the renewals section of our website for advisers.