Tax credits – everything you need to know
Tax credits were designed to lift millions of families out of poverty, but the system is complex and not everyone claims that to which they are entitled.
It is worth investigating if you are eligible, because if you are tax credits could benefit you and your family by thousands of pounds a year.
Child tax credit
The child tax credit is a means-tested benefit paid to parents and carers who are responsible for at least one child under 16 living under their roof, or what HM Revenue & Customs calls "a young person".
A child becomes a young person from 1 September after their 16th birthday, and will remain a "qualifying young person" up to their 20th birthday – providing they are in full-time education or on an approved training course before they are 19.
You can't claim child tax credits for children at university or if they are claiming benefits, such as income support or income-based jobseeker's allowance.
Child tax credit isn't just for the poorest families – households with an income of up to £50,000 may be entitled to some child tax credit if there are at least three children.
Couples have to make a joint tax credit claim – neither of them can claim as a single person. Where parents have split up and live separately the money should go to the person with whom the child normally lives.
Lone parents can also claim child tax credit. Parents or carers don't have to be in work to claim the money, which can be paid either weekly or every four weeks.
What you get
The child tax credit comes in two parts: a "family element" worth up to £545 a year, and a "child element" worth up to £2,690 for each child (in the 2012/13 tax year).
Families with a new baby can claim a further payment of up to £545 in the child's first year, and there are further payments for disabled children (£2,950) and severely disabled children (an extra £1,190).
You can find out how much you might be entitled to by using the government's online tax credit calculator – you will need details to hand of how much you and your partner earn, how many hours you work each week, and how much you pay for childcare.
To apply, call the tax credit helpline on 0845 300 3900. Lines are open from 8am to 8pm every day.
Working tax credit
The working tax credit is designed to top up the earnings of people on low incomes, and the payouts are means tested: how much you get depends on how much you earn. You don't need children to qualify, although you might get more if you do.
Your age and
the number of hours you work each week will also affect how much you get.
You can claim if you are aged 25 or over and working at least 30 hours a week. You can also claim from the age of 16 if you are responsible for at least one child, and are usually working at least 16 hours a week.
People aged 50 or over and working at least 16 hours a week can also claim if they are starting work after receiving benefits for at least six months.
What you get
The working tax credit is made up of a number of different elements:
• The basic element is worth up to £1,920 a year
• The couples and lone parent element is worth up to £1,950 a year
• The 30-hour element, for people who work this length of time or longer a week, is worth up to £790 a year. Couples with at least one child can claim this if they work 30 hours a week between them, providing one works 16 hours or more
• The disabled worker element is worth up to £2,790 a year
• The severe disability element is worth up to £1,190 a year
• The 50+ return to work payment (16-29 hours) is worth up to £1,365 a year
• The 50+ return to work payment (30+ hours) is worth up to £2,030 a year
There is also a childcare element for people who spend money on registered or approved childcare. This is currently worth a maximum of £122 a week for one child or £210 a week for two or more children.
As you can see, tax credits are complicated. HMRC offers an online tax calculator for people who want to work out how much they are likely to get.
To claim working tax credits call the tax credit helpline on 0845 300 3900 between 8am to 8pm.
Overpayments are an integral part of the tax credits system. Because they are means tested, your entitlement constantly changes in line with your income and other circumstances.
That is why your claims information must always be accurate and up to date. You must notify HMRC of any change in your circumstances within one month, as well as check award notices and point out any errors.
If HMRC tries to claw back any overpayments you can appeal against its decision.
If you need more information regarding a claim or appeal, contact the tax credit helpline or your local Citizens Advice bureau.
Alternatively, Community Legal Advice offers free, confidential advice, as does charity Taxaid, which offers free advice – including on tax credits – for people on low incomes.Source: www.theguardian.com