Sometimes you’ll find that the amount of money you earn through work isn’t enough to cover the basic cost of living and in these circumstances, you may be entitled to claim Working Tax Credit to supplement your basic wage.
There are many facets to this particular benefit which we will endeavour to explain in this guide, but to begin with, you must be either in work (employed or self-employed) or starting work in 7 days or less when you make your claim. So if you are signed on at the Job Centre, this benefit isn’t for you – you might be entitled to Jobseeker’s Allowance instead. Working Tax Credit will get paid directly into the bank account of the claimant.
Minimum Working Hours
To qualify for Working Tax Credit, you need to be working for a certain number of hours each week. The minimums vary depending on your circumstances and are listed here:
- 16 hours a week – aged 16 or over and responsible for a child, but not part of a couple
- 24 hours a week between you with one person working at least 16 hours – responsible for a child as part of a couple both aged 16 or over
- 30 hours a week – not responsible for a child and aged 25 or over
- 16 hours a week – aged 60 or over
- 30 hours a week between you with one person working at least 16 hours – responsible for a child as part of a couple both aged 25 or over
There are other conditions that might impact the minimum number of hours you’d be expected to work, including disabilities, hospital stays, prison terms and other forms of incapacity.
To qualify for Working Tax Credit, you must expect the work to continue for at least 4 weeks after the claim is made and you must get paid (i.e. volunteer work does not count).
If you are a teacher or otherwise work at a school, you can still claim during the school holidays.
Limitations To Eligibility
Whilst the government have made access to Working Tax Credits as broad as possible, there are occasions where certain persons are not entitled to make a claim. These include, but are not limited to:
- students who are undertaking a period of employment as part of their qualification
- carers who get paid only via the Rent-a-Room scheme regardless of who they work for
- those who are in prison or remanded in custody but who are working during their incarceration
- those who work for a charitable organisation and who only receive payment for expenses
- those receiving a training allowance unless that payment is treated as part of their taxable income
- those who have received a sports award or other sports funding
- student nurses
Those On Maternity Leave
If you are going on maternity leave and have worked the appropriate number of hours for your circumstances directly before going on leave (this includes a partner if you have one), then you will still be able to claim Working Tax Credit.
This covers the 26 weeks while you are on ordinary maternity leave and up to 13 weeks of any additional maternity leave you take. This is applicable whether you are receiving Statutory Maternity Pay or Maternity Allowance and is the same for the self employed.
After the 39 weeks are up (if you choose to take all of them), you continue to receive Working Tax Credit if you return to work. If you do not go back to your job, then you must inform HMRC within 1 month as you will no longer be eligible.
Similar rules apply to adoption and paternity leave.
Those On Sick Leave
If you are off work for up to 28 weeks, then it is still possible to receive Working Tax Credit provided you were working the required number of hours as per your circumstances before going on leave.
You are entitled to make a claim even if you are receiving Statutory Sick Pay, Incapacity Benefit, Income Support based on incapacity, National Insurance Credits, or Employment and Support Allowance.
You can continue to make a claim assuming you return to work within 28 weeks. If you are off work after this, you must inform HMRC within 1 month.
Those With A Disability
The conditions for eligibility in the case of a person with a disability are too complex to cover in detail here. To read more and to find out whether or not you could claim the disability element of Working Tax Credit, please refer to this Government document.
Getting Help With Childcare
If you are in work but have a child or children, you might qualify to receive additional Working Tax Credit to help cover the costs of childcare. Parents of a single child can claim up to £122.50 per week while those with more than one child can claim up to £210 per week depending on their income.
For full details of how to claim help with childcare costs, and what counts as approved childcare, we once again refer you to a government leaflet. Please click here to read it in full.
How Much Working Tax Credit Will I Receive?
Aside from the disability and childcare elements described above, the table below shows the amount you can expect to receive based upon your annual income.
|Annual income(£)||Single person aged 25 or over, working 30 hours or more a week||Couple (working adults aged 25 or over) working 30 hours or more a week|
Please note that the figures above are for the 2014/15 tax year only and are rough guides – if your income is £11,500 as a single person, for example, then you will receive between £460 and £870.
Of course, if you are responsible for any children, then the amount you can receive is higher. Below are the potential tax credits for 1, 2 and 3 child homes.
|Annual income (£)||1 child/qualifying young person||2 children/qualifying young persons||3 children/qualifying young persons|
Please note that the figures above are for the 2014/15 tax year only and are rough guides – if your household income is £22,000 and you have 2 dependent children, for example, then you will receive somewhere between £3,170 and £5,220.
Your annual income is based on a number of things and you should declare all of them in order to receive the correct amount of Working Tax Credit.
Broadly speaking, the amount of income that you declare should match that which is reported for income tax purposes. This means that it is taken as a gross figure, before any income tax or national insurance have been deducted.
There are some finer points to be made with regards to your income level for the purposes of calculating Working Tax Credit. These include:
- the value of shares purchased in your company of employment via a Share Incentive Plan should be added back to gross earnings
- any contributions that you make to an HMRC registered personal pension scheme are deductible
- in most circumstances, earnings paid into occupational pensions through your employer are not deductible
- income received from a pension (in contrast to earnings being paid into one) are included in your gross figure (excluding war pensions)
- Gift Aid contributions can be deducted
- Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP) are all taxable benefits, but you may take off up to £100 per week – or any amount below this if that is all you received (i.e. if you only received £65 then you cannot deduct £100, only the £65) – for tax credit purposes
- if you are self employed, your taxable profits count as your income
- any taxable benefit (see full list here) that you may already receive from the government ought to be included in your gross income, but non-taxable benefits (see full list here) can be excluded
- income from savings is included apart from that which comes from non-taxable sources (e.g. ISAs)
- income from dividends paid out on shares you own is once again included (unless it is part of an ISA)
- rental income from property does form part of your gross income figure
- aside from income derived directly from employment, taxable social security benefits, self employment, and/or student dependant’s grant, you only need to declare other income if it is over £300. In other words, if you earn less than that in savings interest or dividends, for example, you do not need to declare it. If you earn over this amount, subtract £300 from the total as you only need to report earnings over this amount
- any financial payments you may receive by way of child maintenance or as part of a divorce settlement can be ignored and do not need to be added to your stated gross income
Working out how much your gross income is means covering all of the points above where applicable to your situation. For income coming from employment, you should receive a P60 tax certificate at the end of each tax year. If you left a job before April 5th, you will receive a P45 certificate which shows income received and tax paid during the period worked.
For income from savings, your bank or building society should provide annual statements showing the amount you have received. Once again, you can ignore any interest paid on an ISA.
Dividend income should also be provided by your broker or online share dealing company.
Before calculating how much you will receive, HMRC will subtract a basic threshold (currently £6,240 in 2014/15) from your gross income to give a number known as ‘excess income’. Then 41% of this excess will be deducted from the maximum possible benefit payment to reach the amount you are entitled to.
It’s a bit of a complicated situation in general which is why we recommend entering all of your income details and circumstances into the Government’s online calculator.
What If My Circumstances Change?
If there is a change in your circumstances related to any of the eligibility criteria talked about above then you must contact HMRC to let them know. If you do not, you may receive more or less Working Tax Credit than you are entitled to and you could face a penalty fine of up to £300.
You need to do this no later than 1 month after your circumstances change. This is particularly important if you are going to be eligible for increased payments as they can only backdate things for 1 month, so any extra credits you may have been able to claim before then will be lost forever.
If you are laid off by your employer, you could still be entitled to 8 further weeks of Working Tax Credit.
If your income changes in the current tax year, it may or may not affect the amount of tax credits you receive. This is because the amount awarded to you by HMRC is based on your income during the last full tax year.
This is true in instances where your income rises by no more than £5,000 or falls by no more than £2,500. If your income changes by more than these amounts, the amount of tax credits you receive will be based on your new income after either subtracting £5,000 in the case of a rise income, or after adding £2,500 in the case of a fall in income.
If you require more help or advice when it comes to Working Tax Credit, or any other tax credit for that matter, please contact HMRC directly using the numbers found here.
Please note: Working Tax Credit, along with other payments made to people currently, is gradually being replaced by Universal Credit. If you currently claim tax credits, then you do not need to do anything for the time being until you are instructed to do so by HMRC. If you are about to claim, you might be required to claim the new Universal Credit depending on your circumstances and your place of residence.
Article accurate at time of writing.