[holding answer 15 May 2009]: Tax credits is an annual system which is designed to be responsive to changes in families’ circumstances. This is particularly important when income falls and around 355,000 households who were living on a lower income in March are receiving on average £35 more per week in tax credits.
HMRC calculates an initial award for claimants based on their income for the previous year and their current family circumstances. Awards can be adjusted if claimants tell the Department of a change in their circumstances during the year. After the end of a year, HMRC sends tax credits customers an annual renewal pack asking them to provide or confirm details of their income and circumstances. This information is necessary to determine whether claimants have received the correct amount of tax credits in the tax year just ended. Tax credits customers can complete the process by returning the annual declaration and renewal forms or by calling the tax credits Helpline, usually by 31 July. Detailed information can be found on the Department’s website at
Underpayments are calculated automatically and any amount still due is paid as a lump sum after a tax credits award is finalised and the customer is informed of the amount on their final award notice.