tax rebate impact on UC

Brunswick993

I now care for my disabled wife full time, she gets full PIP and we also receive UC and CA/CE, and making ends meet is tough.
A year ago I was full time employed, but when I was offered redundancy I took it to look after my wife, the timing couldn't have been better as her mobility has become quite poor.
Like most in my position, it's been a hard year of adjustments but we do just about manage to get by.
However, I'm aware that because I was made redundant in October last year, I probably should be due a tax rebate as I didn't work for a full tax year.
But here's the dilemma, if I claim the rebate, i'd imagine there will be a tax record sent through to DWP which will impact my benefits, so I've swerved claiming for now.
Q. Will a tax rebate be regarded as 'income' and affect my benefits?
How long can I leave an unclaimed tax rebate for? Is there an expiry time limit?
Any advise please?

calcotti

An income tax refund is treated as earnings for UC purposes. It will be taken into account a(along with any other earnings) in the assessment period in which you receive it and a deduction of 63% of the amount taken into account will made from your UC. The impact will be reduced if your UC entitlement includes a child element or the LCWRA element. If this applies you will be entitled to a Work Allowance of £503 (if you do not have a housing element) or £287 (if you do have a housing element). https://www.entitledto.co.uk/help/Work-allowance-Universal-Credit. The Work Allowance is an amount of the ‘earnings’ that will be ignored before the 63% deduction is calculated.

This is one of the UC rules I object to most strongly because I think it completely wrong.

Regardless of whether you apply for it or not HMRC should refund you any overpayment within a few months of the end of the tax year. If you do need to claim it there is a 4 year limit https://www.citizensadvice.org.uk/debt-and-money/tax/tax-refunds-claiming-back-overpaid-tax/tax-refunds/

Brunswick993

Thanks Calcotti,
I agree, it hardly seems fair to deduct from a tax overpayment, especially when it was over a year ago. It's like having it deducted twice!
I haven't automatically received any rebate so far, I did get my P45 when I left, so I'm not sure why it's been missed.
I'm still undecided whether to put in a claim or not, would you?
If I only worked 7 months of the tax year and tax is deducted proportionally (x12), is it possible that perhaps i'm not due a rebate maybe?

calcotti

Tax is deducted proportionately so in the situation you describe I would expect you to be due a tax refund. If you are due a refund I see no point in not claiming at some point because even on UC it will not be deducted in full so you will get some benefit from it. If you think your situation may change within the 4 year limitation period you may wish to delay claiming it. If you don’t claim I would expect HMRC to pick it up at some point.

shannonwalters367

Hi I am self employed now out of work due to covid 19. I am due a tax rebate and i also should eligible for the taxable grant in June, I am wondering if I claim universal credit now will it affect my tax rebate or the taxable grant I am due? Thank you in advance 

poppy12345

shannonwalters367 said:

Hi I am self employed now out of work due to covid 19. I am due a tax rebate and i also should eligible for the taxable grant in June, I am wondering if I claim universal credit now will it affect my tax rebate or the taxable grant I am due? Thank you in advance 

If you claim UC providing you don't have savings/capital of more than £16,000 and tax rebate/grant you receive will affect your UC in the month that you receive it, this will likely reduce your UC to zero. It could also reduce your UC to zero the following month. If this happens you will need to make a rapid reclaim through your journal.

Also be ware that if you're claiming tax credits then this will end once you claim UC. Use a benefits calculator to see what you maybe entitled to.

ssdkck

So any tax rebate or self employment grant you may get you have to declare to uc. Do HMRC inform dwp of these ? 

calcotti

ssdkck said:

So any tax rebate or self employment grant you may get you have to declare to uc. Do HMRC inform dwp of these ? 

I don't know the answer to that.

sammyjammy

calcotti said:

ssdkck said:

So any tax rebate or self employment grant you may get you have to declare to uc. Do HMRC inform dwp of these ? 

I don't know the answer to that.

The SE grant will be taxable so yes both will be picked up by Real Time Earnings system from HMRC automatically

JessicaF_2

calcotti said:

ssdkck said:

So any tax rebate or self employment grant you may get you have to declare to uc. Do HMRC inform dwp of these ? 

I don't know the answer to that.

No, they don't. Only adjustments made via PAYE tax codes feed through for employees on the RTI feed. Other tax refunds have to be declared to DWP. 
Also just to add that not all tax refunds are taken into account, only if they relate to a year in which you were in paid work (which probably covers most of them). 
Jess (previously Icequeen99 - i lost my login when the site changed!)

scallywags_3

I have unfortunately been on universal credit since February 2020 due to a heart condition. I am a self employed carpenter under CIS self assessment tax. I normally apply for a tax rebate in April/May. Once it has been filed do I inform UC or do HMRC notify them automatically? Also would all my universal credits stop as it is a lump sum or just a percentage of it? I have a wife who works (been furloughed at the moment) and 3 children.