Working Tax Credit (WTC) and Child Tax Credit (CTC) were introduced in April 2003. This article will focus on WTC as it is paid to those who are working.
However, individuals may qualify for either one or both tax credits depending on their circumstances. In general, WTC is paid to people who have relatively low incomes.
WTC is means tested therefore the amount of the award will depend on the person's income. In order to qualify for WTC a person must be in qualifying remunerative work and meet the presence and residence requirements.
work 16 hours or more a week, be aged 16 or over and be responsible for a child or qualifying young person
work 16 hours or more a week, be aged 16 or over and have a physical or mental disability for which they are receiving a qualifying benefit
work 16 hours or more a week, be aged 50 or over, have started work within the preceding three months, and for six months before starting work, have received one of a number of specified benefits
work 30 hours or more a week and be aged 25 or over.
A person may be able to carry on receiving WTC for a further four weeks after their work ends or their hours of work fall below 16 hours or 30 hours.
WTC is made up of elements which are awarded depending on a person's circumstances.
For example, a childcare element — a person may be eligible for this if they are paying childcare costs to a registered childminder. A person may also be able to claim CTC if they are responsible for a child or qualifying young person.
It is necessary to complete a claim form (TC600) for tax credits. Forms are available from the HM Revenue & Customs (HMRC) Tax Credits Helpline on 0845 300 3900.
They will be required to provide information on their gross annual income which may be available from their P60.
A person can choose to receive payments of tax credits either weekly or four weekly and these will be made direct to a bank, building society or Post Office account.
Tax credits are usually awarded for a complete tax year.
Generally a tax credits award remains the same for the whole of the tax year.
An award of tax credits may be backdated for up to three months from the date of the claim, where it appears a person would have been entitled to tax credits if an earlier claim had been made.
If a person's circumstances change this can affect their entitlement.
Failure to notify HMRC of such changes may result in loss of entitlement or an over payment which will need to be repaid.
There are some changes of circumstances which a claimant must report to HMRC within one month. This includes a person who claimed as a couple but stops living with or separates from their partner.
It is advisable to report any change of circumstances to avoid an over payment or under payment of tax credits.
Further information on tax credits is available by contacting your local CAB or calling the HMRC Tax Credits telephone helpline on 0845 300 3900.
Siobhan Harding is an Information and Policy Officer with Citizens Advice