What are Tax Credits?
Last Updated: Sunday 17th March, 2013
Tax credits were introduced in 1998 as a means of encouraging the unemployed to get back to work. The system was reviewed in 2003 with a focus on two forms of assistance - working tax credit and child tax credit .
There have been numerous problems with the administration of the system due to the nature in which they have to be claimed. Regular information on earnings must be fed to the HM Revenue & Customs for them to constantly adjust the benefits being paid. This has led to reports of vast over receipt of tax credits by some families who are then unable to pay the monies back. As a consequence, there remains a significant amount of credit unclaimed.
The idea behind tax credits is that they supplement the income of low earners to make sure that they are better off in work than on benefits. The credit is paid weekly or monthly into your nominated bank account.
There are a number of criteria to be met before you can qualify for either of the tax credits. It is estimated that 90% of all families could be eligible for some form of payment under the system.
The qualifying criterion for child tax credit is that you look after one or more children at home. To qualify for working tax credit you must be over 25 years old, earn less than Ј12,800 per annum and work for more than 30 hours per week. It is possible to qualify for both working and child tax credits. Additionally, anyone over 50 years old starting work again after being on some forms of common
benefits for at least 6 months may also qualify for working tax credit.
Working out how much you may receive depends on your personal circumstances. These include how many children you have, whether they have any disabilities, the number of hours you work and your earnings. A calculator to help you work out what you may receive is available at the HM Revenue & Customs at website. However, the maximum amount you can claim under the Tax Credit system for the tax year 2008-9 is Ј1,800. The higher your income up to Ј12,800, the less you will receive. For Child Tax, the maximum amount is Ј545 plus Ј2,085. More is available for children with a disability.
It is possible to claim Working Tax Credit as a couple if you are living with a partner of spouse. However, Child Tax Credit can only be claimed by one parent.
In each case, you will be required to tell HM Revenue & Customs of any change in your circumstances throughout the year as this will affect the amount of benefit you receive. Any overpayment of benefit, whether accidental or on purpose, will have to be paid back.
An application pack for both forms of Tax Credit is available from any HM Revenue & Customs office, Jobcentre Plus offices and Benefits offices or you can call 0845 3003900 between 8.00 a.m. and 8.00 p.m. (open seven days a week).
There is an appeals procedure if you believe that your claim for Tax Credits has not been handled appropriately or if your claim has been turned down. Help in preparing your appeal can be obtained through any Citizens Advice Bureau office.Source: www.debtwatchdog.com