Tax Credits and the Self Employed
If you receive Working Tax Credit or Child Tax Credit, you will need to renew your claim by the end of July. To assist in this HMRC should already have sent you a renewal pack. If it is marked “check now” you only need to act if any of the details are incorrect. If it is marked “reply now” then you need to send a response to HMRC by 31 July at the latest.
The main piece of information that HMRC will usually be after is the claimant’s income for the last tax year. For those with employment income, this will simply be a matter of checking their payslips or year end form P60. For the self-employed, the position is slightly more complicated.
Self-employed individuals need to report their taxable profit for the last tax year. If they are on top of their tax affairs, their return for this year will already have been prepared and they will know this figure. However, with the filing deadline being 31 January 2020, many have not even started on this yet.
If the profit amount is not available, then an estimate can be used instead. This estimate needs to be as accurate as a quick calculation will allow. If it is too high, then your tax credit claim will be reduced. If it is too low, then some of the tax credits paid based on that figure will be reclaimed by HMRC when the final figure is supplied to them.
We can not only calculate the appropriate profit figure for tax credit renewals, we can also help you identify legitimate ways of reducing that profit. This will not only increase your tax credits, but will also reduce your final tax bill.