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Tax refund vs Universal Credit

Ginster368

Good Morning peeps!
I am having g a conundrum you may be able to shed some light on!
I have received a £2,000 tax back as between 2019/2020 my -working- income reached £9,200, so less than the tax free 12.5k.

Do I need to report this to the universal credit as it isnt due to paying too much tax but simply not reaching the tax free amount? And will they stop the payments? I could really do to clear 2 debts fully so this would really be a blessing but I do not want to act wrongly or intentionally deceive.

Any tips would be grand!

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Comments

Adrian_Scope

Hello @Ginster368. It's my understanding that tax rebates are meant to be declared to UC and are treated as income (so will reduce your UC for the assessment period it is received in, the same way wages would).

Ginster368

Hi Adrian,
Thanks for your reply, tho I am still unsure, I have asked that question, as a paid service to a "tax specialist" who's answer was not to declare it yet, he was vague about it. Tax refund is not earnings, it's over paid tax against earnings so may not need to be declared apparently yet I cant seem to have a black and white answer...

Adrian_Scope

Hi @Ginster368. I'm not an expert but I do know a fair bit about Universal Credit and would always be wary of a Tax Specialist's understanding of the benefit system. They're experts in their field but don't always know the intricacies of the welfare system.

I've copied the guidance on this below for you to have a look at in case it helps.

The Universal Credit legislation says this:

[F6(4A) A repayment of income tax or national insurance contributions received by a person from HMRC in respect of a tax year in which the person was in paid work is to be treated as employed earnings unless it is taken into account as self-employed earnings under regulation 57(4).]

And the Universal Credit ADM also lists it as earnings:

Types of earnings
H3021
Employed earnings in relation to an employment includes any
1. salary
2. wages or
3. fee.
Note: In tax legislation these earnings are known as “general earnings”

H3022
An actual repayment to the claimant of
1. income tax or
2. NI contributions
by HMRC in respect of a tax year in which a person was in paid work is treated as employed earnings. Where the paid work was from carrying on a trade, profession or vocation then the repayment is treated as S/E earnings (see ADM H4131).
Note 1: Repayments of income tax may include tax relating to other sources such as unearned income. As long as the claimant was in paid work in the tax year the repayment relates to, then the whole repayment is treated as earnings. Note 2: There is no requirement for the claimant to report changes that take place in relation to their tax code or variations in their tax reported via RTI.

Example
Ellie receives a cheque from HMRC for £200. This relates to an overpayment of £600 income tax made in the tax year 11/12 (in which Ellie was in paid work) and an underpayment of £400 in income tax relating to the tax year 12/13. The amount that Ellie should declare as employed earnings is £200 as this is the repayment she received, not £600 which relates to the refund due in one of those years.

I'd always recommend declaring anything like this anyway to err on the side of caution. If you don't need to (like child maintenance) they should ignore it and let you know it doesn't need to be declared.

Ginster368

That's great Adrian! Thank you x

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