What you need to know:
Tax Credits are intended to support families by making work pay - nine out of ten families with children can get tax credits. The Tax Credits system is intended to create a seamless system of support for families and children and are administered by the Revenue & Customs – HMRC. As a lone parent, Tax Credits will form an important part of your income from the time that your first child is born.
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. New claims for Income Support made will not include allowances or premiums for children; these will be paid through CTC. Child Tax Credit is therefore become one of the main
components of a lone parent’s income
.
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 in some cases up to 20 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. Tax credits are calculated for the whole of the tax year, which is different from benefits that are worked out on a weekly basis.
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. Once awarded, your Tax Credits
will not be affected by changes in income of up to £25,000. If you are not sure, we recommend that you report any change in circumstances as this will help you avoid any problems and importantly, avoid any overpayment of Tax Credits - you can do this in writing or by phone or you can contact Gingerbread’s Advice Service and we can help you do this.
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 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
If your income is lower this year than last year, HMRC will use last year’s income to work out your WTC, this means that your WTC will be lower. To make sure that your WTC is adjusted to take account of your lower income you should ask, in writing, that the Revenue & Customs look again the amount of WTC and use the lower level of earnings which will increase the amount of WTC that you are entitled to. Gingerbread recommends that you report any change that you are not sure about and keep a note of when you reported it to avoid any future problems or overpayments.
Overpayments:
If 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.
Will you be better off?
Gingerbread’s Advice Service and Freephone Advice Helpline can give you detailed advice on Benefits and Tax Credits. We will use a computerised benefit checker to work out your entire income when in work - this could be useful if you are thinking about a particular job or just wondering what your income would be compared to being on benefits. We can give all the information that you need to help you decide when to start work. We can work out multiple scenarios for you based on different jobs, hours or anything else that is relevant – just ask.
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 £15, 575 a year (applies until April 2009).
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 (applies until April 2009). a year; or
• Receive WTC and a Disability Element and your total income is less than £15,050 (applies until April 2009). A year; or
• Receive CTC only and your total income is less than £15,050 (applies until April 2009) 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 and give you a full breakdown of how this is worked out.
Revenue & Customs: (HMRC)
Tax Credits Helpline:
Phone – 0845 300 3900
Website – www.hmrc.gov.uk
If you need any more information or advice please contact us:
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Freephone Advice Helpline - 0808 808 8090
Website – www.gingerbreadni.org
Email – advice@gingerbreadni.org |
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