The post below comes courtesy of Derbyhire-based WKM Accountancy. It sheds some light on the complicated world of working tax credits. I hope you find it useful. If you have any questions, please od leave a comment at the end of the post.
Tax credits can be a confusing subject. Last April’s budget introduced several changes to the system which can leave you wondering what you’re now entitled to.
The main issue with child and working tax credits is that people aren’t aware of their entitlements and how they are calculated. This article outlines the differences between child tax credits and working tax credits and how the recent freeze in benefits may affect your tax credit entitlement.
Who qualifies for child tax credit?
You can receive child tax credit for each child you are responsible for under the age of 16, or under the age of 20, if they are in approved education or training. The amount you receive differs depending on your income and circumstances but families are entitled to a basic amount called the family element, worth around £545 in 2015.
Unfortunately, for new claims made after 2017, benefits will be limited to the first two children, meaning you will not receive anything for the third child and so on.
Although George Osborne aims to improve the financial position of the UK, it is believed that the cut in tax credits will affect more than seven million children due to the limitations put in place around the amount you receive for your family.
Working tax credit
If you don’t have any children, you could still be entitled to working tax credit. To claim working tax credit you either need:
● to be aged 16 to 24 and have a child or
● have a qualifying disability or
● be 25 years old or over, with or without children
However, you do need to be working above a certain number of hours a week and getting paid for those hours while earning below a specific wage to qualify. These limits are:
● a couple without children must be earning below £18,000*
● a single-person must be earning below £13,100*
*These limits can vary depending on the applicant’s circumstances.
In regards to minimum hours, a 25-59 year old must be working at least 30 hours a week whereas someone with a disability or a single parent must be working at least 16 hours to qualify for working tax credit.
The basic amount of working tax credits for the 2015-2016 tax year is around £1,960 a year. However, you may be entitled to various ‘elements’ on top of the basic amount if your situation fits the criteria, for example, up to £2,010 if you are a couple applying together alternatively up to £2,970 if you have a disability.
The new Government’s Budget plans to freeze working tax credits for four years, therefore finding out if you qualify now would be a sensible idea.
How are tax credits paid?
Both working and child tax credits are paid into your bank or building society account every week or every four weeks from the date of your claim up until the end of the tax year (5 April). For couples receiving tax credits, you must choose one account for the funds to go into.
The best way to determine whether you are entitled to tax credits and how much you could receive is by using the Government’s Tax Calculator.
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Disclosure: The above post was produced in association with WKM Accountancy and I was compensated for hosting it. To see my disclsoure policy, please follow this link.