BENEFITS EXPERT: How Tax Credits could impact on any cost of living payment

Some more updates regarding the cost of living payments, this specifically relates to clients whose entitlement to the payment is based on payment of Tax Credits, either Child Tax Credits, Working Tax Credits or both.

"We would advise to seek advice from a benefits advisor."
"We would advise to seek advice from a benefits advisor."

Tax Credit awards are reviewed annually, the process beginning at the start the new tax year; HMRC will send client’s a provisional award letter for 2022/2023. Claimants may have been advised that their entitlement for this tax year will be nil based on information provided when they have completed their declaration of expected income for 2022/23.

Some Tax Credit claimants may then have had a change in circumstances they weren’t expecting, for example their hours at work may have dropped and this is likely to be permanent, they may have had a new child, began to incur child care costs that they didn’t anticipate.

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In this situation they may have contacted HMRC to report the change, this had led to a review of the current nil award and are now entitled to Tax Credits.

So in relation to the £650 cost of living payments claimants may not have been expecting a payment because they had no Tax Credits in payment, then reported a change that led to entitlement for some or the whole of the 2022/23 Tax year.

As long as this established entitlement to Tax Credits on or before May 25, 2022 then they would be entitled to the cost of living payment.

HMRC have announced that they are planning to revisit such claims to see if these claimants are now entitled to Tax Credits for the relevant qualifying period to award the cost of living payments.

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No action is required by claimants.

Some readers may not be aware that they can report a change during the tax year in question and have a nil award decision looked at again.

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So the advice would be if any readers had a nil Tax Credit award letter for 2022/23 but a change in their circumstances may lead to a review and payment then to consider reporting this. We would advise to seek advice from a benefits advisor as not every change will lead to payments of Tax Credits and in some cases could actually create an overpayment or penalty. So before proceeding seek advice.