Tax credit renewals and the move to UC – what does it all mean?

Tax credit renewals – what do I need to do?

The tax credits renewals process finalises tax credit awards for the tax year that has just ended (2021/22) and it acts as a claim for the current tax year (2022/23).

Each year, HMRC send out tax credit packs to claimants about their renewal. There are two types of renewal, explained below. What you need to do depends on which type you get.

• Auto-renewal
  The pack will have a black line across the first page and say ‘check now’. This is where HMRC show all your circumstances and income and ask you to check the details.
  
  If everything is correct and you have no changes to report, you don’t need to do anything. HMRC will finalise your award for 2021/22 and automatically renew your claim for 2022/23. The renewal notice is your final award notice for 2021/22 and shows what HMRC will decide about your new 2022/23 claim on 31 July 2022.
  
  If the information in your renewal pack is incorrect or incomplete you must tell HMRC by 31 July 2022. This is so they can finalise your award for 2021/22 and set up your award for 2022/23 using the correct information.​
   
• Reply-required renewal
  The pack will have a red line across the first page and say ‘reply now’. This is where HMRC ask you to check the details they hold about you and also ask you to tell them your annual income for 2021/22.
  
  You must reply to complete your renewal. The deadline for replying is 31 July 2022. If you do not yet know your actual income for 2021/22 you must still give HMRC an estimate of your income by 31 July. You should then contact HMRC again by 31 January 2023 to either confirm the estimate is correct or replace it with the actual figures.

​Note: Even if you did not receive any tax credit payments during 2021/22, or you have since stopped your claim, if you claimed tax credits at all during the 2021/22 tax year, you will receive papers from HMRC. You must follow HMRC’s instructions to finalise your claim for 2021/22 and, if necessary, renew your claim for 2022/23.

You may not receive a normal renewal pack if you claimed universal credit in 2021/22. We explain more about this below. 

What if I claimed universal credit in 2021/22 tax year?

If your tax credit claim stopped in 2021/22 and you made a claim for universal credit in that same tax year, HMRC should have already finalised your 2021/22 award. This means you should not get a renewal pack. If you claimed universal credit close to 5 April 2022, you may still get some paperwork to finalise your 2021/22 claim.

Your 2021/22 claim will be finalised using different rules called in-year finalisation. Read the notes that come with the form very carefully to make sure you enter the correct figures, because income is calculated differently to the usual tax credit rules. 

What if I claim universal credit on or after 6 April 2022?

If you claim universal credit during the renewals period (on or after 6 April 2022 up until the time your renewal pack was sent out), you may have to complete two packs: one to finalise the claim for 2021/22 and the other to finalise the claim for the current year 2022/23.

Your 2022/23 claim will be finalised using different rules called in-year finalisation. Read the notes that come with the form very carefully to make sure you enter the correct figures, because income is calculated differently to the usual tax credit rules. 

Where can I find information about how to check my renewal papers?

The renewal pack should include some guidance notes. It is important to read those notes carefully, especially the parts that explain what counts as income for tax credits. For example, some coronavirus support payments need to be included as income for tax credit purposes, but others do not. See our tax credits and coronavirus guidance for information about this.

Your renewal papers might show income figures that HMRC have received from employers and pension providers through the tax system. However, these figures don’t always include the deductions that are allowable for tax credit purposes. Make sure you check to see if you can make any deductions from your income for things such as certain pension contributions, employment expenses and gift aid donations.

There is more information about tax credit renewals on GOV.UK.

How do I renew my tax credits?

You can renew tax credits online, via the HMRC App, by telephone or through the post.

HMRC’s online service is found on GOV.UK, either via your personal account (if you have set one up) or by going directly to the ‘Manage your tax credits’ service on GOV.UK.

If you haven’t received your renewal pack contact HMRC.

Why does my pack include information about universal credit?

Universal credit is gradually replacing tax credits and some other means-tested benefits. Eventually the tax credit system will close down completely and you will need to either claim universal credit or pension credit if you need financial support. This is being done in stages.

HMRC state that it is no longer possible for anyone to make a brand new claim for tax credits, but existing claimants can still renew their claims and add extra elements. The next stage involves DWP and HMRC starting to move (‘migrate’) people to universal credit.  

If you are an existing tax credit claimant – there are three ways you could move to universal credit now. Briefly, these are:

• Voluntary – you can choose to claim universal credit

• Natural – your circumstances change which ends your tax credit claim or you need to claim additional support from another benefit that UC is replacing

• Managed – DWP and HMRC send you a notice telling you that you must claim UC if you want to continue receiving support

⚠️You can read about the detail of each of these on our tax credits and UC page. If you already get tax credits, you should ensure you fully understand how you will be affected before making any claim for UC.

I have reached pension age – will I move to universal credit?

If you claim tax credits and have reached your state pension credit age, then you will not move to universal credit. It is not possible to make a claim for universal credit if you have reached state pension credit age. Instead, you may be able to claim pension credit. The same rule applies if you claim tax credits jointly with a partner who has also reached state pension credit age.

If you claim tax credits jointly with a younger partner who has not reached their state pension credit age, then you are a ‘mixed age couple’. Most mixed age couples are able to claim universal credit and will be moved to universal credit eventually. This is because most mixed age couples are not eligible to make new claims for pension credit.

However, if you are part of a mixed age couple and you already get pension age housing benefit, you may still be able to claim pension credit instead of universal credit. If this applies to you, speak to a welfare rights specialist before making any new claims for either universal credit or pension credit. The rules are complicated and you need to make sure you are making the right claim.

We do not yet have any information about the potential move of tax credit claimants to pension credit.

I get tax credits now – should I make a voluntary claim for universal credit?

If you get tax credits, you will receive a flyer in this year’s renewal pack telling you about universal credit. DWP and HMRC think that some people will be better off under universal credit and they are encouraging people to think about claiming UC now, rather than waiting to be moved as part of the formal migration exercise.

⚠️Before doing this, speak to a welfare rights specialist: you should first understand what universal credit might mean for you. As soon as you make a claim for universal credit, your tax credits will stop and you won’t be able to claim again even if you are not entitled to any universal credit.

Universal credit is not a like for like replacement for tax credits. Some people will be better off claiming universal credit than their current tax credits and/or benefits, some will be about the same and some will be worse off.

Most people who are expected to be worse off and who only move to universal credit under the formal managed migration will be paid an extra amount, called transitional protection, at the point they move. This is because the government have said there will be no cash losers at the point a person is moved from their existing legacy benefits to universal credit. 

Anyone who makes a voluntary universal credit claim or has to claim universal credit naturally due to a change of circumstances will not get transitional protection. If you received a severe disability premium with certain social security benefits (not tax credits), then you may qualify for a transitional SDP element in your UC award if you move voluntary or due to a change of circumstances.

There are lots of differences between tax credits and universal credit. Some of the differences affect how much you will get, others affect what you must do to continue receiving the benefit. For example, under universal credit there is no minimum number of hours you need to work to qualify but you and your partner may be required to look for additional work and attend interviews at the Job Centre.

There are lots of other important differences. Universal credit has capital rules that affect people with savings that tax credits do not have. There are also differences in the way certain income is treated. If you are self-employed, the rules are very different and you should make sure you understand the universal credit rules about gainful self-employment, the minimum income floor and reporting self-employed earnings.

Is the universal credit flyer in my renewal pack my migration notice?

The universal credit flyer included in your tax credit renewal pack is not a universal credit migration notice. You do not need to do anything with the flyer, but you may find the information it contains useful or interesting and it is a good idea to begin to get familiar with universal credit.

Once you are selected for managed migration under the formal exercise, DWP will send you an official migration notice which will invite you to make a universal credit claim within 3 months of the date of the letter.