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Wednesday, 3 October 2023

What are tax credits?

Tax credits are payments from the government. If you're responsible for at least one child or young person, you may qualify for Child Tax Credit. If you work, but are on a low income, you may qualify for Working Tax Credit. You can often get both types of tax credits. They aren't taxable.

Who can get tax credits?

If you've got children you could get tax credits, but you don't need to have children to claim. You may also qualify if you are working and on a low income.

What type of tax credits can you get?

You may get one of the following - or both.

Working Tax Credit

Working Tax Credit is based on the hours you work and get paid for, or expect to be paid for. You can claim whether you're an employee or a self-employed person. But unpaid work doesn't count for Working Tax Credit.

Child Tax Credit

Child Tax Credit is paid to you if you are responsible for at least one child or young person who normally lives with you. You don't have to be working to claim Child Tax Credit.

How much do you get?

The amount of tax credits you get depends on things like:

  • how many children you have living with you
  • if you live with someone as a couple
  • whether you work - and how many hours you work
  • if you pay for childcare
  • if you or any child living with you has a disability

Your payments also depend on your income. The lower your income, the more tax credit you can get.

What are the current income limits for getting tax credits?

Whether you can get tax credits, and how much you can get, depends on your own circumstances.

As a very rough guide, if your annual income is not above one of the following 'limits', you can probably get tax credits:

  • if you have one child it is £26,000
  • if you have two children it is £32,200
  • if you're single without children it is £13,000
  • if you’re in a couple without children it is £18,000

These are the limits for getting tax credits in the current tax year - ending on 5 April 2013.

You're not likely to get anything if your income is above these amounts. But it's important to know that:

  • these income limits don't apply to everyone - for example if you have more children, pay for childcare, have a disability, or your child has a disability, the income limit for you could be higher
  • you need to make a claim to get a definite answer to how much you are entitled to

Will you qualify based on your income?

For a better idea of whether you're likely to qualify for tax credits based on your income, you can use:

  • 'at a glance' entitlement tables - follow the link below that applies to your situation
  • a quick online questionnaire - this will tell if you're likely to qualify for tax credits, but it won't tell you how much you can get

The entitlement tables are only a rough guide to how much you could get for the current tax year - ending on 5 April 2013. They will be updated with the amounts for the next tax year on 6 April 2013.

What counts as income?

Your income before tax and National Insurance is taken into account. When you first claim tax credits, your income from the year that ended on 5 April 2023 is used. If you're in a couple, your joint income is used.

Earnings from work and some state benefits count as income. 'Other' income also counts. This can include interest on savings, pensions or income from property - but only if the total amount was more than £300 for the year. The actual amount of any savings you might have doesn't affect tax credits.

How tax credits work

You'll usually need to make a joint claim for tax credits if you are any of the following:

  • married
  • in a civil partnership
  • living together as if you were married or in a civil partnership

You can usually only make a single claim if you don't fall into one of these groups.

Tax credits are paid directly into your bank, building society, Post Office® or National Savings account if it accepts Direct Payment. Payments are either weekly or every four weeks.

Who gets the tax credits payments?

If you're both working and you both qualify for Working Tax Credit, you can decide which one of you will get the payments.

Couples claiming Child Tax Credit need to decide who is the children’s main carer. If you’re the main carer then the money will be paid to you.

How tax credits payments work

If you’re making a new claim your payments will usually run from the date of your claim to the end of the tax year. For example, if you make a claim on 10 November 2012, your payments will be worked out from that date until 5 April 2013. Claims can usually be backdated for up to one month - sometimes longer - from the date the Tax Credit Office received your claim form.

Tax credits payments are not counted as taxable income.

Renewing your tax credits

Each year during April, May or June the Tax Credit Office will write to you asking you to:

  • check the information they have about your personal circumstances
  • confirm the income you received in the year that has just ended

This is known as 'renewing' your tax credits claim. The deadline for renewing is usually 31 July.

Why you need to renew your tax credits claim

You need to renew to make sure that the payments you've been getting were correct. It also allows the Tax Credit Office to base your payments for the year ahead on the right amount of income.

Sometimes the Tax Credit Office will have paid you too much or not enough. If this happens they will make an adjustment to make sure that your payments are correct. Any payments made from 6 April 2023 to the date on which you renew your claim are temporary or provisional. If you don't renew, you may be asked to pay them back.

Changes at home and work

If your circumstances change at any time this can affect the amount of money you should be getting. Things like starting a new job, splitting up with a partner or having a baby can all make a difference to your tax credits.

Contact the Tax Credit Office as soon as possible to tell them about any changes. To do this you can call the Tax Credit Helpline, or write to the Tax Credit Office. But you can't report changes online for tax credits.

Provided by HM Revenue and Customs

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How to claim

Where to get the tax credits claim form and who should make the claim

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