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What is Tax Credit?
There are two types of tax credits. These state benefits are of two types:
- Working Tax Credit
- Child Tax Credit
The amount paid to work people who receive a low income is known as Working Tax Credit. Both self-employed or working for someone can benefit from working tax credit. It is aimed to boost the income of anyone who has a low income. Working Tax Credit is administered by Her Majesty’s Revenues and Customs (HMRC).
Child Tax Credits are benefits given to working or non-working people responsible for a child.
You can claim anyone or both the tax credits. The eligible person is paid directly by the government.
However, anyone who receives Universal Credit cannot benefit from working tax credit. Moreover, by September 2024, anyone who claims working tax credits will be switched to Universal Credit.
What is the eligibility for getting a tax credit?
Your eligibility for a tax credit depends on the number of working hours, your income, and whether you have kids.
You can avail of the working tax credit if you are currently receiving a working tax credit or child tax credit.
However, you and your partner need to work full time in addition to the above criteria. The number of working hours per week varies accordingly.
- If someone is single but is responsible for a child, he must be above 16 years of age and should be working for a minimum of 16 hours per week to get tax credits.
- Suppose your partner gets any allowances (for instance, Carer’s Allowance, Disability Living Allowance (DLA), Personal Independence Allowance (PIP), Employment and Support Allowance or Attendance Allowance), and you both are responsible for a child. In that case, you must be above 16 years of age and should work for a minimum of 16 hours per week to get tax credits.
- If your partner is living in a hospital or is in prison and you are responsible for a child, you must be above 16 years of age. To qualify for tax credits, you must work a minimum of 16 hours per week.
- If anyone has a disability, he must be above 16 years of age and work a minimum of 16 hours per week to get tax credits.
- If anyone is above 60 years of age, he must work a minimum of 16 hours per week to get tax credits.
If anyone does not qualify for any of the above-listed particular criteria, he must be more than 25 years of age and should be working a minimum of 30 hours per week to get tax credits.
However, if you do not have a partner, you can make a single claim to receive tax credits. If your partner joins you later, you would have to make a new joint claim to get tax credits, or if you are separated from your partner, you are required to close down your joint claim.
Moreover, you would not get a tax credit if you or your partner’s age is over the State Pension Age. In that case, you would receive pension credit.
How much can you earn and still get tax credits?
There is no limit for your earning to get a working tax credit. It depends only on your (and/or your partner’s) working hours and certain situations.
The government determines the limit for income to the avail tax credit. For instance, for couples, the income limit could be £18,000, while the income limit to get a tax credit for a single person could be £13,000. The income limit is generally higher for a single person (or has a partner) if he is responsible for a child. A person having a disability also has a higher income limit to the avail tax credit.
For you (and/or your partner), the income limit will be set to £35,000 if you are responsible for two children. However, they must be born before April 6, 2007.
How much can you get for a Working Tax Credit?
Up to £2,005 is provided each tax year as a Working Tax Credit. You might also be entitled to receive extra tax credits. This additional tax credit is provided in certain circumstances. These include.
- If a couple applies for tax credit together, they can receive working tax credits up to £2,060 within a tax year.
- If a single parent responsible for a child applies for a tax credit, he can receive a working tax credit up to £2,060 every tax year.
- If a working person who works for at least 30 hours weekly applies for tax credit together, he can receive working tax credits up to £830 in a tax year.
- If a person having a disability applies for a tax credit, he is entitled to receive a working tax credit of up to £3,240 in a tax year.
- If a person who has a severe disability applies for a tax credit, he is entitled to get a working tax credit of up to £1,400, excluding the disability living allowance.
- If a person paying for childcare applies for a tax credit, he can receive working tax credits up to £122.50 in a tax year. If he has two or more children, he can get tax credits up to £210 during a tax year.
How much money can you get for a Child Tax Credit?
The amount entitled to someone as child tax credit depends on the birth year of his child (or children).
If your children are born before April 6, 2017, you are entitled to receive child tax credits for all of your children. You might also receive the ‘family element’ of a child tax credit.
However, if your children are born after April 6, 2017, you are entitled to receive child tax credits only on two of them. In this case, you can get a ‘family element’ if at least one of your kids is born before the mentioned date. You might also get a child tax credit on your third child in certain cases.