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. HMRC ran a small exercise during January and February 2018 for people who had tax credit nil awards. They wrote to selected claimants in this category to advise them that HMRC would not renew their tax credit claim for 2018/19 unless the claimant contacted HMRC by 31 March 2018 to say they did not want to withdraw from the system and wanted their claim to be renewed. This was in preparation for further work ahead of the migration of tax credit claimants to UC.

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 and this may be more relevant where they think this could happen but they are unlikely to qualify for Universal Credit, bearing in mind that once UC is available in a postcode area, most people cannot make a new tax credit claim. You can read more about Universal Credit in our entitlement to Universal Credit section.

Last reviewed/updated 17 April 2018