What happens to your payments if your income changes?

If your income in the current tax year is different from the previous year, the amount of tax credits you get may change. If your income changes in any of the following ways, then you need to tell the Tax Credit Office about it. A tax year runs from 6 April one year to 5 April the next.

If your income goes down in the current tax year by £2,500 or less, but your other circumstances stay the same, your payments won’t change for the current tax year. However, it’s still a good idea to tell the Tax Credit Office when you know your income will be lower as they will use your new income figure to work out what to pay you for the following year. If your income goes down in the current tax year by more than £2,500, your tax credits payments may go up.

If your income goes up in the current tax year by £5,000 or less, this might not make any difference to the amount of tax credits you receive for the current year. However, HM Revenue and Customs advises that it’s best to tell the Tax Credit Office straight away when you know your income will be higher. If you don’t, you may be paid too much (called an overpayment) when they work out what to pay you for the following year and the overpayment will have to be repaid. If your income goes up in the current tax year by more than £5,000, your tax credits payments may go down. This is a change introduced this year relating to the level of income disregard (see box below).