Are Tax Credits Paid In Arrears?

If you are wondering whether Tax Credits payments are made in arrears, you will find the answer to your question in the following blog post. For a deeper perspective of the topic, we will also explore how soon to expect your first payment for Tax Credits once your claim is approved and discuss some possible reasons that may cause a delay.

Are Tax Credits Paid In Arrears?

Yes, Tax Credits can be paid in arrears, depending on the specific type of Tax Credit and the country in which it is being claimed. In some cases, Tax Credits are paid in advance, while in other cases, they are paid after the tax year has ended.

For example, some Tax Credits in the United States are paid in advance, such as the earned income tax credit (EITC). The EITC is a refundable tax credit that is based on the taxpayer’s income and family size. The credit is paid in advance through paycheck withholdings or estimated tax payments, and any remaining credit is paid after the tax year has ended.

On the other hand, in the United Kingdom, Tax Credits are typically paid in arrears. This means that the Tax Credits payment is based on the previous year’s income, and payments are made after the end of the tax year. 

Payments for Tax Credits in the UK are usually made weekly or monthly into a bank, credit union or building society account. The amount that you can claim with Tax Credits depends on a number of factors, such as income and number of children.

However, now that Universal Credit is replacing the six legacy benefits including Tax Credits, qualifying applicants will not be able to apply for a fresh claim and will have to apply for Universal Credit instead. 

How Long Do I Have To Wait For My Tax Credits Payment?

How long you have to wait for your Tax Credits payment depends on the following factors:

• if your application is immediately accepted by HMRC
• if your documentation is completer
• if you need to provide additional information
• if you need to reapply for your claim

Once you file your claim for Tax Credit, it usually takes HMRC three weeks to approve (or in some cases ask for more details or even reject it). However, this time frame varies and it may take them more time to revert with feedback if they need to investigate a case in detail.

Once your claim is approved, HMRC will write to you to confirm that you have qualified for Tax Credits payments by sending you an award notice. The same piece of correspondence will mention the date of your first expected payment as well as future payments. 

What Can Cause Delays In Your First Tax Credits Payment?

There are some key pieces of information that, if left out or erroneously mentioned in your claim, can cause delays in your claim being approved and the first payment being sent across. These include (but are not limited to) the following

• you have made mistake(s) or missed out on information in your claim
• some of the pieces of information don’t match and HMRC needs supportive evidence from you
• you do not have a National Insurance number and HMRC needs to arrange an interview for you to get a National Insurance number
• you have been refused a claim before and HMRC needs more time to investigate 
• you have been sanctioned before and HMRC is re-evaluating your case

What Are The Factors That Can Affect Your Tax Credits Payments?

The key factors that can affect your Tax Credits payments are primarily your income and circumstances. Below is a list of real-life situations that can affect your eligibility to claim Tax Credits or the amount you claim:

• there is a change in your relationship status such as moving in with a new partner, getting married or forming a civil partnership, separation or divorce
• there has been a death of a child or partner
• there is a change in your working hours (reduced to less than 30 hours a week)
• you start working for less than 16 hours while claiming childcare costs
• your child stops going to childcare for at least 4 weeks
• your childcare costs stop, reduce by £10 or more a week, or claimants are getting help
• your childcare provider is no longer registered or approved
• your child moves out of home, goes into care or is taken into custody
• your child who is over 16 leaves approved education or training
• you move out of the UK for 8 weeks or more
• you leave the UK permanently (this includes losing the right to reside in the UK)
• you (as part of a union) go on strike for more than 10 consecutive days

If you are wondering whether or not you are eligible for Tax Credits, you can use an online Tax Credits calculator to confirm your eligibility or call the Tax Credits helpline at 0345 300 3900.

Conclusion:

The above discussion helps to conclude that Tax Credits payments in the UK are paid in arrears. This is usually done on a monthly basis where the approved amount is transferred to the claimant’s bank, building society or credit union account.

References:

How are tax credits paid?

Payments « How do tax credits work? « Guidance «