Notional income and anti-avoidance for tax credits

Produced by a Tolley Personal Tax expert

Personal Tax

Guidance

This guidance note considers special tax credit rules which can treat someone as having income they have not actually received. Note that tax credits cease on 5 April 2025. New claims for tax credits are no longer possible and no more payments will be made after 5 April 2025. Any existing claimants will be migrated to the universal credit system. See the Universal credit guidance note. There is information about migration notice letters on GOV.UK.

Anti-avoidance for tax credits

The tax credits legislation makes very little mention of specific anti-avoidance rules. Instead, it refers to ‘notional income’ which is income that is treated as the claimant’s income even though the claimant did not receive it.

For example, these rules apply where claimants:

•
deliberately get rid of income in order to claim or increase their tax credits
•
fail to apply for income to which they are entitled
•
provide a service for low rates of payment

TCTM04801

When advising a director of an owner-managed company in relation to tax credits,

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