Tax Credits

What you need to know:

Tax Credits are part of the “Welfare Reform and Modernisation programme” and are intended to support families by making work pay.  The Tax Credits system is intended to create a seamless system of support for families and children and are administered by the Revenue & Customs.

There are two tax credits:

• Working Tax Credit (WTC) - a means-tested tax credit for working people on low incomes.
• Child Tax Credit (CTC) - a means-tested tax credit for people with children.

Both tax credits are claimed on the same form.

Working Tax Credit (WTC):

Working Tax Credit acts as a top up for wages. You could qualify for WTC if:

• you have a child (under 16, or under 19 and still in full-time education) and
• you are working at least 16 hours a week and
• you are not subject to immigration control (with certain exceptions)

The number of hours is the number you actually work - if you work regular overtime then this will be included. There are special rules for term time only school workers, women on Statutory Maternity Pay or Maternity Allowance, people on Statutory Paternity or Adoption Pay, and people off work sick and getting Statutory Sick Pay – you should take advice if any of these circumstances apply.

WTC can include extra amounts for:

• disabled workers
• those who are working more than 30 hours per week
• 'approved' childcare costs.

Child Tax Credit (CTC):

Child Tax Credit can be claimed by anyone with a dependant child under 16. You can apply whether you work or not and it is paid in addition to Child Benefit.

It is made up of a basic family element (paid at a higher rate if you have at least one child under 1 years of age) and amounts for each child. You may receive increased CTC if you have a child with a disability. This is because an extra amount is added to your calculation for each child who is on DLA or who is registered blind. If your child gets the highest rate of DLA care component a further amount is also added. You can claim if:

• you have a child (under 16, or under 19 and still in full-time education) and
• your income is below the income threshold, or no more than a set amount above and
• you are not subject to immigration control (with certain exceptions)

CTC is paid directly into your bank account, either weekly or four weekly, whichever you choose. Payment of CTC continues while a child is in hospital and for eight weeks after the death of a child or from eight weeks after the date that you are no longer the child’s main carer.

How Tax Credits are worked out:

The amount of tax credits that you will get is usually based on your annual taxable income for the previous tax year and the amount of Tax Credits will therefore depend on the level of your income. In the current tax year you can earn up to £25,000 more than the income for the previous tax year without this extra amount affecting your current award but anything over £25,000 will reduce your entitlements for the current year and could result in an overpayment. This means the Inland Revenue will take back some of your next award.  You can avoid this overpayment by reporting any relevant changes when they happen – you should do this in writing or contact Gingerbread’s Advice Service and we can help you do this.

You are guaranteed some Child Tax Credit so long as your income is less than £55,000 or £66,000 if you have a baby under one year old.

If you are getting DLA for more than one child and have substantial childcare costs you may get Tax Credits even if your income is above these figures. Unlike most other means tested benefits there is no capital limit – this means that money such as savings are not taken into account.

Length Of Awards:

Tax Credits are awarded for up to 12 months to coincide with the tax year, but an award may be for a period of less than this if, for example, you have a baby, or become a lone parent as the result of relationship breakdown or bereavement.

The length of the award is from the date of application to the end of the tax year, but the amount may be altered, or entitlement cease altogether, if there is a change of circumstances. Awards can be backdated for a period of entitlement of up to 3 months from the date of the claim.

Changes Of Circumstances:

It is important to advise the Revenue & Customs of any changes in circumstances that could affect the amount of tax credits. These could include:

• changes in your working hours - stopping or starting work, or reducing or increasing hours
• changes in your family - when a child over 16 leaves school, or you have a new baby
• your childcare costs increase by at least £10 a week for at least four weeks in a row.
• you or a family member becomes entitled to a disability element, or stops being entitled to it
• if your income changes by more than £25,000 over the year
• you are no longer a lone parent

You should take advice on this issue if you are unsure whether or not a change should be reported.

Overpayments:

If the Revenue & Customs advise you have been overpaid Tax Credits we recommend you take independent advice as soon as possible and before you agree to repay anything. It is usually worth checking these decisions and it may be in your best interests to ensure the decision is accurate, as repaying an overpayment can mean a significant reduction in

your income.

Better Off Calculations:

Gingerbread’s Advice Service and Freephone Advice Helpline can give you detailed advice on Benefits and Tax Credits. We can work out your entire income for work compared to benefits so you have all the information that you need to be able to decide on starting work.

Other Benefits:

School Meals - You can get free school meals, free milk and vitamins for children under 5 if you are entitled to Child Tax Credit and are not working at all or if you work less than 16 hours a week and your total income is less than £13,480 a year.

Health Benefits - You can get free prescriptions, free NHS dental treatment, free NHS sight tests, vouchers towards the costs of glasses or contact lenses, travel costs to hospital for NHS treatment and reduced price dried baby milk for a child under 1 if you :

• Receive WTC and CTC and your total income is less than £15,050 a year; or
• Receive WTC and a Disability Element and your total income is less than £15,050 a year; or
• Receive CTC only and your total income is less than £15,050 a year.

Housing Benefit - Tax credits are treated as income for Housing Benefit and it is the amount that is actually paid that counts even if you are being over- or under-paid

Sure Start Maternity Grant - this grant of £500 can be paid if you qualify for Child Tax Credit at a rate higher than the family element

Funeral Payment - this Social Fund payment can be made if you qualify for Child Tax Credit at a rate higher than the family element

For further information:

You can get advice on applying for Tax Credits from Gingerbread – we can help advise you on the qualifying criteria, on how the assessment process works, we can help you fill in the form and deal with revisions, appeals, overpayments and other relevant benefits. We can also work out Tax Credits for you and we can also tell you if you will be better off if you move from benefits to work.

A PDF version of this information is also available.  Download it today by clicking on the image to the left.

For further information the Freephone Advice Helpline is available on:

The Advice is FREE; So is the call!

Alternatively, you are welcome to drop into our centres in Belfast and Derry to see us. Our addresses for the drop in service together with times of operation are as follows:

If we are unable to see you then we will arrange a mutually convenient time for you to return for an appointment.

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