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.
Withdrawal of protective claims
Each year HMRC write to claimants with long term nil awards (we understand this means those who have had nil awards for at least 13 months) in January and February to advise them that HMRC will not renew their tax credit claim for the following tax year unless the claimant contacts HMRC by 31 March to say they do not want to be withdrawn from the system and want their claim to be renewed as usual.
This is in preparation for further work ahead of the migration of tax credit claimants to UC. Anyone who receives a letter should carefully consider whether they want to stay in the system, because if they do not contact HMRC by the date marked in their letter (usually 31 March), their claim will not be renewed and HMRC state they will not 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 20 May 2022