TAX CREDITS
Introduction
If you're responsible for at least one child or young person who normally lives with you, you may qualify for Child Tax Credit. In addition if you work, but earn low wages, you may qualify for Working Tax Credit. The general rule is that to qualify for tax credits you must be aged 16 or over and usually live in the United Kingdom. Couples must make a joint tax credits claim. If you are part of a couple, you cannot decide to claim as a single person.
Child Tax Credit
Child Tax Credit is for people who are responsible for at least one child or qualifying young person. Child Tax Credit is paid direct to the person who is mainly responsible for caring for the child or children. If you are a lone parent you will receive the payment. Child Tax Credit can be paid to workers who continue to pay UK National Insurance Contributions when posted from the UK to work in another country in the European Economic Area.
Working Tax Credit
Working Tax Credit is for people who are employed or self-employed (either on their own or in a partnership), who
- usually work 16 hours or more a week
- are paid for that work, and
- expect to work for at least 4 weeks
and who are
- aged 16 or over and responsible for at least one child, or
- aged 16 or over and disabled, or
- aged 25 or over and usually work at least 30 hours a week
Working and child tax credits rates
£ per year (unless stated) | 2008-09 |
Working Tax Credit | |
Basic element | £1,800 |
Couple and lone parent element | £1,770 |
30 hour element | £735 |
Disabled worker element | £2,405 |
Severe disability element | £1,020 |
50+ Return to work payment (16-29 hours) | £1,235 |
50+ Return to work payment (30+ hours) | £1,840 |
Childcare element of the Working Tax Credit | |
Maximum eligible cost for one child | £175 per week |
Maximum eligible cost for two or more children | £300 per week |
Percentage of eligible costs covered | 80% |
Child Tax Credit | |
Family element | £545 |
Family element, baby addition | £545 |
Child element | £2,085 |
Disabled child element | £2,540 |
Severely disabled child element | £1,020 |
Income thresholds and withdrawal rates | |
First income threshold | £6,420 |
First withdrawal rate | 39% |
Second income threshold | £50,000 |
Second withdrawal rate | 6.67% |
First threshold for those entitled to Child Tax Credit only | £15,575 |
Income disregard | £25,000 |
Child benefit and guardian’s allowance rates from 6 April 2008
£ per week |
|
| 2008-09 |
Eldest/Only Child |
|
| £18.80 |
Other Children |
|
| £12.55 |
Guardian’s Allowance |
|
| £13.45 |
Some Examples
Example 1
William and Christine have twins who are aged 3. William works 32 hours per week and earns £20,000 a year. Christine stays at home and looks after the children. The family is entitled to the following credits in 2008-09:
| £ | |||
| Working tax credit - basic | 1,800 | ||
| Working tax credit - couples element | 1,770 | ||
| Working tax credit - 30 hour element | 735 | ||
| Child tax credit - child element (£2,085 * 2) | 4,170 | ||
Total credits excluding family element | _____ 8,475 | ||
£ | |||
| Income | 20,000 | ||
| Threshold | (6,420) | ||
| ______ 13,580 | |||
| 39% of £13,580 | 5,296 | ||
| Main credits due | _______ 3,179 | ||
| Family element due | 545 | ||
| Total credits for the year | ______ 3,724 ______ |
This works out at as a payment of £71.61 per week or the credits can be paid monthly.
Example 2
Brian Thomas and Maria Neale have been together for fourteen years and have three children between the ages of 5 and 10. Brian works 40 hours a week and earns £49,000 a year. Maria works ten hours a week and earns £6,000 a year. The family is entitled to the following tax credits in 2008-09.
| £ | |||
| Working tax credit - basic | 1,800 | ||
| Working tax credit - couples element | 1,770 | ||
| Working tax credit - 30 hour element | 735 | ||
| Child tax credit - child element (£2,085 * 3) | 6,255 | ||
Total credits excluding family element | _____ 10,560 | ||
£ | |||
| Income (£49,000 plus £6,000) | 55,000 | ||
| Threshold | (6,420) | ||
| ______ 48,580 | |||
| 39% of £48,580 = £18,946 but restricted to | 10,560 | ||
| Main tax credits due | ______ 0 | ||
| Family element due | 545 | ||
| Restricted at 6.67% of (£55,000 - £50,000) | (335) | ||
| Total credits for the year | ______ 210 ______ |
This works out as a payment of £4.04 per week or the credits can be paid monthly.
Your entitlement
To check your entitlement to tax credits using the calculator provided by H M Revenue & Customs click on the image below:
More advice
For more specific advice please contact us by telephone on 01299 879140.
