:: Tax Credits ::

The Top 5 Ways Your Tax Will Change in 2013

If you’re a UK taxpayer, you can expect to see your tax bill change in 2013. Changes to your personal allowance, child benefit and the rates of income tax all come into force in 2013, altering the amount of tax paid by millions of people.

If you want to know how your tax will change in 2013, keep reading.

Your personal allowance will go up

One of the Government’s main commitments has been to ensure that no-one pays tax on the first £10,000 of their income. To do this, they have gradually been increasing your Personal Allowance – the amount of money you are able to earn before you start paying tax.

From April 6, 2013, if you are aged under 65, your personal allowance will be set at £9,205. This represents a £1,100 rise on the previous tax year. It means that you don’t pay any tax on the first £9,205 of your income.

The top tax rate will fall

For the 2013/14 tax year, the three main rates of income tax will be:

  • The basic rate of 20 per cent (no change)
  • The higher rate of 40 per cent (no change)
  • The additional rate of 45 per cent (reduced from 50 per cent in 2012/13)

This means that if you pay the additional rate of tax, you will see the rate of tax you pay fall from 50 per cent to 45 per cent from April 6, 2013.

You won’t get an age related increase to your personal allowance

From 2013/14, your age-related personal allowances will not be increased. You will only be eligible for an age-related personal allowance if:

  • You were born on or before 5 April 1948 (for the £10,500 allowance)
  • You were born on or before 5 April 1938 (for the £10,660 allowance)

If you were born on or after 6 April 1948, you will be entitled to the personal allowance of £9,205 for 2013/14.

You’ll start paying higher rate tax sooner

In the 2011/12 tax year the basic rate limit was reduced by £2,400 to £35,000. This meant that the higher rate of tax (40 per cent) was applicable to taxable income over £35,000.

 

For the 2012/13 tax year, the basic rate limit was further reduced by £630. And, in 2013/14, the basic rate limit will be reduced by £2,125 to £32,245.

This means that you start paying the higher rate of tax (40 per cent) on any taxable income you earn over £32,245.

You may start paying tax on your Child Benefit

Is you or your partner’s individual adjusted net income over £50,000 per year, and do you receive child benefit? If the answer to both these questions is ‘yes’, from 2013 you will have to declare this Child Benefit. For most people this will be done through filling in a Self Assessment tax return.

This change comes into force on 7 January 2013.

Alternatively, you can tell the Child Benefit Office that you want to stop receiving Child Benefit payments. In this case you won’t be liable for the new tax charge.

How To Renew Your Tax Credits Before The 31 July Deadline

Do you receive tax credits?  If you do, then you should be aware that you have to renew your tax credits claim every year.  And, the deadline for renewing your tax credits this year is 31 July.

If you don’t renew your tax credits then your tax credits could stop.  So, keep reading our guide to everything you need to know about renewing your tax credits.

Why do I have to renew my tax credits?

The Tax Credit Office asks you to renew your tax credits claim once a year.  This is to make sure you have been paid the right amount of tax credits in the previous tax year.  It also ensures you’re receiving the right amount of tax credits in the current tax year.

You need to renew your tax credits so that the Tax Credit Office has the right information.  This will ensure that you’re receiving the right amount of tax credits.

Do I have to renew my tax credits?

You will need to renew your tax credits if you have been sent an Annual Declaration form (TC603D or TC603D2) with an Annual Review notice (TC603R).

Everyone who makes a claim for tax credits during a tax year gets a renewal pack.  This also applies if you claimed tax credits but didn’t get them because your income is too high or if you only received tax credits for part of a tax year.

If you have only been sent an Annual Review notice (TC603R), you won’t need to renew your claim.  You may receive this form if you just receive the family element of Child Tax Credit or if you got Income Support, income-based Job Seeker’s Allowance, income-based Employment and Support Allowance or Pension Credit for the whole of the last tax year.

When do I renew my tax credits?

You should have received your renewal pack between 17 April and 30 June.  If you haven’t received your renewal pack by 30 June 2012, you should contact the Tax Credit Helpline.

The Tax Credit Helpline will send you the renewal forms you need. You’ll then have 30 days to renew or report a change in circumstances. You can’t get a renewal pack online.

Once you have received your renewal pack you will be able to renew your tax credits claim.  You should do this as soon as possible.

The final deadline for renewing is usually 31 July.

There are two ways to renew your tax credits.  Firstly, you can complete the Annual Declaration (TC603D or TC603D2) and return it to the Tax Credit Office.  The address is:

HM Revenue & Customs Tax Credits

Comben House

Farriers Way

Netherton

L75 1WB

 

Alternatively, you can renew by calling the Tax Credit Helpline.  The Tax Credit Office advises that the helpline normally gets busy as the July 31 deadline nears.  It is therefore recommended that you call the helpline to renew as early as you can.

When you renew your tax credits via the helpline, you should have the following information to hand:

  • Your tax credits renewal pack
  • Your total income for the last tax year
  • Details of any changes in your circumstances

You should still renew your claim even if you can’t provide details of your actual income for the last tax year.  When you complete your renewal pack you should provide an estimate of your income.  You will later have to confirm details of your actual income (normally by 31 January).

What happens to my tax credit payments?

Your tax credit payments will carry on from the start of the new tax year (6 April) until you renew your claim, as long as you renew by the 31 July deadline.  Your payments may continue for longer if your renewal pack was issued late.

Bear in mind that the payments you get until you renew your tax credits could be based on out of date information.  So the sooner you renew, the sooner the Tax Credit Office can make sure you’re getting the right amount.  If you are claiming more tax credits than you are entitled to, you may have to pay back any overpayment.

What happens if I don’t renew my tax credits?

If you’ve been sent an Annual Declaration (TC603D or TC603D2) and you don’t renew your tax credits, your payments will stop.  In addition, you will receive a statement showing you whether you’ve been paid too much, or not enough, in tax credits.  You will have to pay back any overpayment from both the previous tax year and from the start of the new tax year.

You will get a statement from the Tax Credit Office about your tax credits payments and you then have a further 30 days to provide the information requested in your tax credits renewal pack.

If you don’t provide the information within 30 days, you will usually have to make a new tax credits claim.

I have renewed my tax credits claim. What happens next?

Once you have renewed your tax credits claim, the Tax Credit Office will send you an award notice for both the last tax year and the new tax year.  This will also detail any overpayments or underpayments that apply.  You can expect to receive this award within around eight weeks.  If you haven’t received your award within eight weeks, contact the Tax Credit Helpline.

The Tax Credit Office may write to you to check that you have renewed your credits correctly.  And, they may also require you to provide documentary evidence of your income. So, it is important that you keep any relevant paperwork safe.

So, if you haven’t renewed your tax credits yet, act now so you don’t miss the 31 July deadline.

Everything You Should Know About the 2012 Working Tax Credit Changes

If you claim or want to claim Working Tax Credit, the rules changed in April 2012.  Many people who previously qualified for the credit can no longer claim whilst other people may have experienced cuts to their Working Tax Credit.

Our guide is designed to help you to understand the recent changes.  Keep reading for everything you need to know about the current Working Tax Credit rules.

The number of hours you have to work

Before April 2012 you could claim Working Tax Credit if you worked at least 16 hours per week and you were responsible for at least one child.  However, from 6 April 2012, the rules have changed.

Now, if you’re not responsible for children and are aged 25 or over, you have to do at least 30 hours paid work per week to claim.  If you have a disability and are aged 16 or over, or if you are aged 60 or over, you must do at least 16 hours of paid work per week.

If you are responsible for children, you have to do at least 16 hours of paid work per week if you are single.  If you’re in a couple your must work at least 24 hours per week between you, with one of you working at least 16 hours per week.

For example, if you’re in a couple and only one of you works, that person must work for at least 24 hours per week.

You’ll also continue to qualify for Working Tax Credit if you are in a couple where one of you works 16 hours or more, and the other:

  • is in prison or remanded in custody awaiting trial or sentence
  • receives certain benefits due to ill health (such as Disability Living Allowance)
  • is a hospital in-patient

 

If your hours of work do fall, you are obliged to tell the Tax Credit Office within one month of your circumstances changing.  You should also get in touch with the Tax Credit Office within one month if:

 

  • you or your partner were working at least 30 hours a week, and your hours have dropped to less than 30 hours a week
  • you are in a couple with children, and your joint working hours drop to less than 30 hours a week

The rules relating to updating your information have also changed

Before April 2012, if a change in your circumstances resulted in your tax credit payments going up, you would usually get the higher amount backdated for up to three months. However, this also changed in April 2012.

From 6 April 2012, the ‘backdating’ period reduced to one month. If you report a change that means your payments go up, the higher amount will only be backdated by up to one month.  So, you should report any changes as soon as you can.

The 2012 Tax Changes Come Into Force

It’s the start of a new tax year in the UK.  This means that there are various important changes to income taxes which are almost certain to affect you.  Whether you’re employed, self employed or a pensioner, the tax changes in 2012 will probably affect what tax you pay.  But what are the changes?

Keep reading to learn more about the tax changes that will affect you in 2012.

How much can you earn before paying tax in 2012?

Your Personal Allowance is the amount of money that you’re allowed to earn before you start to pay tax.  You may also be eligible for additional allowances such as a Married Couples Allowance or Blind Person’s Allowance.  From 6 April 2012, the tax-free allowances that most people in the UK benefit from are changing.

The changes can be summarised as:

  • Personal Allowance for people up to age 65 – In 2012 this rises to £8,105 (from £7,475).  This means you can earn up to £8,105 before you start to pay tax in 2012/13
  • Personal Allowance for people aged 65 -74 – In 2012 this rises to £10,500 (from £9,940).  This means you can earn up to £10,500 before you start to pay tax in 2012/13
  • Personal Allowance for people aged 75 and over – In 2012 this rises to £10,660 (from £10,090).  This means you can earn up to £10,660 before you start to pay tax in 2012/13
  • Married Couple’s Allowance – In 2012 this rises to £7,405 (from £7,295)
  • Blind Person’s Allowance – In 20120 this rises to £2,100 (from £1,980)

These changes to allowances are likely to affect your tax code for the tax year 2012/13 (the tax year which runs from 6 April 2012 to 5 April 2013).  The standard tax code for someone under the age of 65 with a full Personal Allowance and no other allowances/deductions will be 810L (it was 747L in tax year 2011/12).

Change to the rate at which you start paying the higher rate of tax

From 6 April 2012 there is also a change to the point at which you start paying the higher rate of tax (40%).

The point at which you will pay the higher rate of Income Tax has decreased by £630 from £35,000 to £34,370 in 2012/13.  This is to balance the £630 increase in the personal allowance for people aged under 65.  This means that you’ll pay 40% tax on any taxable income you earn over £34,370.

Tax Credits changes 2012

As well as changes to tax allowances and the rate at which you start to pay higher rate income tax, there are also significant changes to tax credits in 2012.

The two main changes to tax credits are:

  • a reduction in the income limit for child tax credit, from about £40,000 to about £26,000 for a family with one child
  • an increase in the number of hours couples with children have to work to be eligible for working tax credit.  You’ll now have to work 24 hours per week rather than 16 hours

Introduction to Tax Credits

Tax credits are available in the UK if you are on a low income or if you are responsible for a child.  There are two main types of tax credit:

  • Working Tax Credit
  • Child Tax Credit

Many people are eligible for both types of tax credits, which are non-taxable payments made to you by the government.

Here, we look at what tax credits are available and who is eligible to receive them.

Are you eligible for tax credits?

According to HM Revenue and Customs (HMRC), nine out of ten families with children qualify for tax credits.  Even if you don’t have any children, you may still be eligible to claim if you’re on a low income.

Child Tax Credit is paid if you are responsible for at least one child, and you don’t necessarily have to be working to claim.  Working Tax Credit is paid based on the hours that you work and on your income.

What tax credits could I receive?

The amount of tax credits that you can claim differs from person to person and depends on a number of factors including:

  • How many hours a week you work
  • How many children live with you
  • If you live with a spouse or partner
  • If you pay childcare costs
  • Your income

What do I need to earn to claim tax credits?

Tax credits are aimed to support people with lower earnings and so there are annual income limits that generally apply.  Your tax credits may be reduced or stopped if you earn over:

  • £41,300 – if you have children
  • £12,900 – if you are single without children
  • £17,700 – if you are a couple without children

Only by making a formal tax credits claim will you be able to determine exactly what you are entitled to.  There are other factors that can be taken into account (such as the costs of childcare) and you may be entitled to more tax credits.

The entitlement limits and amount of tax credits paid also generally change every year and so the figures may be different in future years.