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 re-calculated.

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 re-computed for the whole year to give them the tax credit entitlement which is actually due, reflecting the full annual circumstances and income. If they had not made a claim, but had delayed claiming until the fall in their income, they would only have been allowed 31 days backdating as a maximum.

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

HMRC wrote to claimants with nil awards in January and February 2020 to advise them that HMRC will not renew their tax credit claim for 2020/21 unless the claimant contacted HMRC by 31 March 2020 to say they did not want to withdraw from the system and wanted their claim to be renewed. It is likely a similar exercise will be used in 2020. This is in preparation for further work ahead of the migration of tax credit claimants to UC. Anyone who received a letter should have considered carefully whether they wanted to stay in the system, because if they did not contact HMRC by 31 March 2020, their claim will not be renewed and they are unlikely (unless an exception applies) to be able to make a new tax credit claim in the future now that UC has rolled out across the UK.

You can find out more about this exercise in our renewals section.

Last reviewed/updated 28 April 2020