Tax Credits: Protective claims

Because tax credit entitlement accrues at a daily rate throughout the year, income is worked out by being spread evenly, day by day, over the whole year.

This can mean that tax credits already received may have to be recalculated.

This can work to the claimant’s advantage if they start the year on a high income and finish it on a low income, especially if they have made a claim at the start of the year and been given a Nil Award. This is because their award is recomputed for the whole year to give them the tax credit entitlement which is now due. If they had not made a claim, but had delayed claiming until the fall in their income, they would only have been allowed three months' backdating.

A claim made in these circumstances and followed by a Nil Award is loosely termed a 'protective' claim. The helpline will often refuse to give a claimant a claim form if they deem their income to be too high to qualify. Claimants should insist that a claim form is issued so that they can make a protective claim.

HMRC conducted an exercise in March 2011 and 2012 to remove claimants with Nil awards (either Nil award in that year or who HMRC expected to be Nil awards from the following April due to changes to the system) from the system as part of a cost saving initiative. You can find out more about this exercise in our renewals section.

Claimants may choose to make a ‘protective’ claim for tax credits if they think their circumstances are likely to change during the coming year from an initial Nil tax credit award but they are unlikely to qualify for Universal Credit. You can read more about Universal Credit in our entitlement to Universal Credit section.

Updated 23 May 2016