Feeling the Pinch?

Many people are being affected by the current economic slowdown through job losses, reductions in income and increased living costs.

Now, more than ever in recent years, it is important you claim all that you are entitled to, and let HM Revenue & Customs (HMRC) know if your circumstances have changed.

If the downturn is likely to affect you, you may find the following information helpful.

Tax and National Insurance Contributions (NICs)

Redundancy/Unemployment

If you are being made redundant, you may be entitled to statutory redundancy pay.  Your contract may entitle you to a higher payment than the statutory minimum and your employer may be more generous still. Some payments can be tax free, for information on tax free redundancy payments click here .

If you become unemployed, you might not use your full tax free allowances this tax year.  If so, you might be able to claim some tax back that you paid earlier in the year by completing form P50 and sending it to HM Revenue & Customs (HMRC). For more information on form P50 click here . 

National Insurance Contributions (NICs) are calculated for each week or month you work and are not refunded if you lose your job part way through the year. Nevertheless they do count towards the contributory benefits, which you might need to claim in the coming months, and ultimately towards your state pension.

Reduction in Income

If you are an employee and remain in the same job but your income has dropped, for example because you are no longer required to work overtime, the Pay As You Earn (PAYE)  system should recalculate your tax as you go along. If your PAYE Code  is correct you need take no further action. For more advice on being employed on a low income click here .

But if you are self-employed and your business profits fall, you might be able to claim to reduce the payments on account  you make under self-assessment. Click here for information on self assessment , and for more advice on being self employed click here .

If you are aged 65 or over, you are entitled to a higher age-related personal allowance unless your income is too high, in which case your age-related entitlement is gradually withdrawn until you get only the basic personal allowance. If you are in this situation, but your income falls over the coming months, make sure you check whether this entitles you to the higher age-related personal allowances .

Tax credits 

It is important that with any change in circumstances, you consider your tax credits position. There are certain changes which must be reported to the Tax Credit Helpline . Do this within one month of the change.

Losing your job is a change that must be reported, as is any change in the normal pattern of your working hours if it means you were working 30 or more hours a week, but are now working less than 30; or you were working 16 or more hours, but are now working less than 16.

If your hours have fallen, it could be that you are no longer entitled to working tax credit. Nevertheless, if your normal working hours fall below 16 a week, or you stop work altogether, you should continue to receive working tax credit for a further four weeks under special 'run-on' provisions

Even if you remain in work (and with too high an income to qualify for tax credits) but you feel your job may be at risk, then there is an advantage in claiming tax credits in case you need to draw on them later. This way you will secure a nil award which can later be revised for the whole period of the award if necessary. Otherwise, if you leave it until you have fallen on hard times before claiming, your award can only be backdated by three months.

You should also consider making a ‘protective claim’  if you are self-employed, in case your profits fall.

If you remain in work but your income has gone down, you should consider telling the Tax Credit Helpline as this may increase your award; but – take care – if you over-estimate the reduction in your income you could be paid too much in tax credits which you might have to pay back later. For more information on overpayment click here .

Remember also that most childcare costs affect your entitlement to working tax credit . If a change in circumstances means that your childcare costs have changed, again, make sure you report it.

An unfortunate side-effect of losing your job and ceasing to receive working tax credit is that any prior overpayment debt which was being spread forward becomes due and payable within 30 days. You should resist demands for immediate payment and ask for it to be spread over at least 12 months or longer if your circumstances necessitate it. You can also ask for the debt to be deferred or written off if you are experiencing hardship.

State Benefits

When you lose your job, you may be entitled to claim support from the state until you get back into work. You should contact your local Job Centre Plus office  for further information about your entitlements. Certain benefits (such as help with housing costs, council tax and school lunches) are administered by the Council.

You may be entitled to claim Job Seekers Allowance , Housing Benefit , Council Tax Benefit , as well as other means tested benefits.

Qualifying for some benefits could also automatically entitle you to others, for example help with health costs, such as prescription charges , and free school lunches.

If you are aged 60 or over, you should check whether you are entitled to benefits such as Pension Credit  and make sure you claim additional benefits such as the Winter Fuel Payment .

These are just some pointers to help you start checking what help you might be able to obtain – other support may be available depending on your exact circumstances (for example, disability or ill-heath may also be factors in making benefits claims). Your local Council Customer Service Office and the Welfare Rights Service can help you to navigate your way through the benefits maze. The Citizens Advice Bureau  can also provide assistance.

Debt

If you are worried about paying your debts, and in particular if you are worried you might lose your home, ask for help straight away.  Talk to your landlord or mortgage provider and let them know about your change of circumstances.  Get advice from National Debtline , the Council's Debt Advice Service, or the Citizens Advice Bureau . Contact the Housing Options Centre for more details of the government's mortgage rescue scheme.

Other Knock-on Effects of a Change

If you income goes down, or you start receiving state benefits or tax credits, that can mean that you automatically become entitled (or ‘passported’) to other state assistance that you may not have considered.

For instance you might be able to apply for assistance with insulating your home under the Government’s Warm Front initiative . If your children are at college or university (or indeed if you are a mature student), entitlement to grants or student loans could also be affected, so make sure you review your student finance options .

Useful telephone numbers

ACAS (Advisory, Conciliation, Arbitration Service) – Advice on employment issues
0845 7474747 (Textphone – 0845 60 61 600)

Redundancy pay helpline
0845 1450 004

Jobcentre Plus benefit claim line
0800 055 6688 (Textphone – 0800 023 4888)

Jobcentre Plus – help finding a job
0845 606 0234 (Textphone – 0845 60 55255)

Winter Fuel helpline
0845 915 15 15 (Textphone 0845 601 5613)

Pension Credit helpline
0800 99 1234 (Textphone 0800 169 0133)

Benefits Enquiry Line
0800 88 2200 (Textphone 0800 243355)

Benefits Enquiry Line – help filling in claim forms
0800 44 11 44

NHS help with prescription costs helpline
0845 8501166

Education Maintenance Allowance
0800 121 8989

Tax Credit helpline
0845 300 3900 (Textphone 0845 300 3909)

National Insurance Contributions
0845 302 1479 (Textphone 0845 915 3296)

National Minimum Wage helpline
0845 600 0678 (Minicom 0845 915 3296)

Newly self employed helpline
0845 915 4515 (Textphone 0845 915 3296)

Community Legal Advice
0845 345 4 345

National Debtline
0808 808 4000

Consumer Credit Counselling Service
0800 138 1111

Acknowledgements to the Low Incomes Tax Reform Group  for the template text used in this briefing.