Tax credits auto renewals - another HMRC balls-up!!

zagfles

Well it looks like HMRC have done it again!

If you only got the family element of tax credits last year (£545) it's likely you'll get an "auto-renewal" where they ask you to confirm your income last year and this year are in a certain ranges, and if yes they'll auto-renew and give you a zero award for this year.

But they are using the wrong numbers! For people on the borderline this could mean losing out on several hundred in tax credits this year.

Example for family with 2 kids (working 30+ hours, no childcare/disabilities):

Step 1: Is your income for 2011/12 between 30272 and 40000?
NO: Phone us
YES: Got to step 2

Step 2: Is your income for 2012/13 likely to be less than 29763
YES: Phone us
NO: Your review is complete [and you get NOTHING this year]

The number in bold is WRONG. Step 1 does correctly confirm your 2011/12 family element only award is correct, but it is the wrong number to use to determine your 2012/13 award.

If this family earned under £32,263 last year then they definitely are entitled to tax credits this year (provided this year's earnings are under £42,263).

But if they earned say £30500 and they follow the above steps, they'll get a zero award and they'll probably never get the money, not even at next year's renewal since they won't ask for 2011/12 income next year. They'll miss out on over £700 in tax credits:eek:

For a family with 1 child (30+ hours etc) the bold figure in Step 1 is 24032, when it should be 25702. For 3 kids the bold figure will probably be around 36500 when it should be about 38824.

Basically if you're above the step 1 figure but not by more than a few thousand, give them a ring and tell them your income otherwise you could miss out on tax credits.

Icequeen99

Are those figures from a real renewal notice? Were they definitely family element only last year rather than Nil award?

IQ

zagfles

Icequeen99 wrote: »

Are those figures from a real renewal notice? Were they definitely family element only last year rather than Nil award?

IQ

Yes they are from a real renewal notice I have in front of me. Family element only in 2011/12, it confirms that unless the claimant phones, the 2011/12 award will be finalised at £545.34 and the 2012/13 payments will be nil. Family with 2 kids, 30+ hours, no disabilites/childcare.

In the renewals thread Candy53 posts an example for a family which has to be one child, 30+ hours etc (judging by the Step 2 figure - threshold minus £2.5k disregard).

https://forums.moneysavingexpert.com/discussion/2991856

Candy53

Yes, the figures for the '1 child, were the figures I posted to 'zagfles' which were from my Annual renewal/awards notice. It was all in one.

Candy

Icequeen99

Zagfles,

Well done for spotting this.

Although I think you are right overrall, the figure in bold (30,272) is not wrong for finalising 2011-12 but it is wrong for calculating 12-13. It is as if there is a step missing which should ask 'Is your 11-12 income between 30272 and 32,263'?

Edited to add: the easiest thing for HMRC would have been to use 32,263-40,000 as the range here.

The problem seems to be that HMRC have not got the right figure as the basis for 12/13.

This has only become an issue because the 40,000 second income threshold has been removed.

oh dear.

IQ

zagfles

Icequeen99 wrote: »

Zagfles,

Well done for spotting this.

Thanks, but I can't take the credit it was Candy53 who first spotted it...

Although I think you are right overrall, the figure in bold (30,272) is not wrong for finalising 2011-12 but it is wrong for calculating 12-13. It is as if there is a step missing which should ask 'Is your 11-12 income between 30272 and 32,263'?

Edited to add: the easiest thing for HMRC would have been to use 32,263-40,000 as the range here.

The problem seems to be that HMRC have not got the right figure as the basis for 12/13.

This has only become an issue because the 40,000 second income threshold has been removed.

oh dear.

IQ

Yes, although it could have applied to a lesser extent in the past if they used the PY threshold for the range, since someone slightly above the PY threshold for getting family-element only, could be below it for the CY due to increases in the elements. Then if CY income rose a bit and put them above the CY threshold then next year's auto-renewal will be in the range too, so they could have missed out on getting a bit more than the family element. But I'm not sure how they did it in the past...

dundeediva

Actually the renewal is correct.

The £30272 figure for last year is the cut off where if you earned less than that you would be entitled to more than just the family element for last year and you would get money back.(as per IQ above)

The figure for this year is the new threshold minus 2500 disregard (as per previous threads, long story to explain!).

If your income for last year is between the amounts and your income for this year is above the 29763 you wont get anything (as the 29763 is the only figure that will affect the amount you get, anything above that and it wont matter, as its less than the disregard).

zagfles

dundeediva wrote: »

Actually the renewal is correct.

The £30272 figure for last year is the cut off where if you earned less than that you would be entitled to more than just the family element for last year and you would get money back.(as per IQ above)

The figure for this year is the new threshold minus 2500 disregard (as per previous threads, long story to explain!).

If your income for last year is between the amounts and your income for this year is above the 29763 you wont get anything (as the 29763 is the only figure that will affect the amount you get, anything above that and it wont matter, as its less than the disregard).

The figure is correct for finalising 2011/12. There is no argument there, I said that in my OP and IQ said it above.

The figure is incorrect for determining the initial award for 2012/13. If your income in 2011/12 is £30500 (assuming 2 kids etc as above) then you are entitled to tax credits this year providing your income doesn't go up to more than about £42k in 2012/13.

But if you go along with the instructions in the auto-renewal you won't get any. And it won't sort itself at next year's renewal because they won't ask for 2011/12 income.

Also the 29763 figure for 2012/13 is correct but only if your 2011/12 income is over 32263.

superwoman4

Zagfles,
I have sent you a Private Message but your inbox is full.

rayhool

Our combined income for this year is going to be 30800 but last year it was 36000, I started a new job at the end of March hence the drop in income. I informed HMRC of this when I changed jobs. My renewal has come through saying I am not entitled to any payments, so I rang HMRC to confirm this years expected earnings and they said the system still said I was not entitled to anything.

Can anyone throw any light onto this?

Icequeen99

rayhool wrote: »

Our combined income for this year is going to be 30800 but last year it was 36000, I started a new job at the end of March hence the drop in income. I informed HMRC of this when I changed jobs. My renewal has come through saying I am not entitled to any payments, so I rang HMRC to confirm this years expected earnings and they said the system still said I was not entitled to anything.

Can anyone throw any light onto this?

It is because your income for this year is being treated as 33,300 which is over the threshold if you have two children (with no disabilities, childcare costs). This is because of the disregard, the first 2,500 of the fall in your income is being disregarded.

IQ