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Extension of £500 payment for working households on tax credits

Published on 23 September 2021

In April 2021, HMRC made one-off payments of £500 to 1.4 million working households on tax credits. This was part of the Government’s response to the coronavirus pandemic. An extension to the scheme has now been announced, which means a small number of tax credit claimants who did not qualify for the payment in April will now receive the one-off payment. This article gives a brief overview of who qualifies under the extension and highlights links to our more detailed guidance.

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What is the one-off payment for?

The Government announced in March that they would make a one-off £500 payment to certain working households in receipt of tax credits – broadly equivalent to £20 a week for 6 months. This is instead of the temporary £20 a week increase to the basic element of working tax credit that was in place to 5 April 2021.

Why has the scheme been extended?

1.4 million households qualified for the payment under the original rules. To qualify under the original rules, on 2 March 2021, you must have:

  • had working tax credit elements included in your tax credit award calculation and
  • been awarded some working tax credit or child tax credit

Tax credit awards are provisional, they are not finalised until after the tax year ends when your actual income figures are known. Income changes during the year do not need to be reported (although it is often a good idea to tell HMRC as soon as possible) and so some people missed out on a payment even though once their actual income was known they would have qualified. The rules have been extended to ensure those people can qualify based on their finalised award.

Who qualifies under the extension?

If you did not qualify for a payment under the original rules, you may now qualify if, for a period that includes 2 March 2021, your final tax credits award for 2020-2021 shows you

  • had working tax credit elements in the award calculation and
  • you have been awarded some working tax credit or child tax credit

I think I qualify. Do I have to claim the payment?

No claim is required for the payment. HMRC will make the payments automatically. If you qualify under the extension, HMRC will make the payment after your award is finalised.

What if I haven’t received it?

If you think you should have received a payment – either under the original rules or under the extension, you should contact HMRC’s tax credits helpline or tax credits web chat. You can only qualify under the extension if your award has been finalised.

Where can I find out more about the payment?

We have published some guidance for claimants which explains more about:

  • who qualifies for the original payment and extension payment
  • when it will be paid
  • how it will be paid
  • what to do if you have not received the payment
  • how changes of circumstances and income affect the payment, and
  • the circumstances in which HMRC can ask for the payment back.

We have also published some more detailed guidance for advisers on our specialist website.

Contact: Jane Booth (click here to Contact Us)
First published: 24/09/21


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