Claiming tax credits

Tax credits can be worth thousands of pounds each year. Your entitlement depends on your household income, but you may be surprised to find out how much you can earn and still qualify.

What are tax credits?

Tax credits are payments from the government straight into your bank account. There are two types – Child Tax Credit and Working Tax Credit.

Child Tax Credit

If you’re responsible for any children under 16, you could get Child Tax Credit. You can also qualify if you have children aged 16 to 19 who are studying full-time in sixth form or at a further education college.

There are plans to change the way you claim Child Tax Credits starting in April 2017.

From this date, it is proposed that if you are making a new claim, support will be limited to the first two children (unless you have a multiple birth) and you would no longer be able to claim the family element.

Disabled children would be protected and you would still be able to claim the disabled child premium for any of your children who are eligible to get it.

If you are already claiming Child Tax Credits and you have more than two children, you wouldn’t be affected by the changes.

Working Tax Credit

Working Tax Credit is based on the hours you work and how much you earn. It doesn’t matter whether you’re an employee or self-employed. You don’t have to have children to qualify for Working Tax Credit, but if you do, you might be entitled to more.

Do you qualify and how much could you get?

How to claim

Get what you’re due and avoid overpayments

Tax credits awards are estimates, which are finalised after you’ve renewed your claim each year.

To avoid overpayments, make sure you tell the Tax Credit Office straight away if your circumstances change during the year as this can affect your income. This should also ensure that any increases you’re due can be paid to you straight away.

Tax Credits and income changes

From April 2016, the amount by which your income can change before you have to tell the Tax Credit Office falls from £5,000 to £2,500. This is called the income disregard.

If your income goes up by £2,500 or more and you delay telling the Tax Credit Office or wait until the next time your claim is due to be re-assessed, you may find that you have been overpaid tax credits.

You will be asked to pay this extra money back, either by reducing your future tax credits or by direct payments if your tax credits have stopped.

To avoid the bill, it’s even more important to tell the Tax Credit Office within 30 days of when you get the extra money. It’ll be easier for your tax credits to be adjusted, and decrease the chance you’ll be chased for overpayments at a later date.

It also works the other way. If your income falls by £2,500 or more, you might be entitled to more tax credits.

If you are asked to repay tax credits and will struggle to pay, speak to the Tax Credit Office as soon as you can, and certainly within 30 days.

Find out more about what to do if you’re overpaid tax credits on GOV.UK
Call the Tax Credit Helpline on 0345 300 3900 to let them know about any changes to your circumstances

Tax credits to be replaced by Universal Credit

Tax credits are being phased out and replaced by Universal Credit. This new benefit is being introduced in stages over the next few years. To begin with, it affects people who are newly unemployed in selected areas around the country.

Basically, Universal Credit will be paid as a single monthly payment that will include a standard allowance plus other ‘elements’ - for example for children, childcare, housing and caring. So the amount you get will depend on your circumstances.

If you’re already claiming tax credits you probably won’t be affected until later on. At the moment, you would only need to claim Universal Credit instead of tax credits if:

  • you start living with a partner who already receives Universal Credit
  • you live in one of the areas where Universal Credit is being introduced and you lose your job

You can continue to make new claims for tax credits. You can’t claim tax credits and Universal Credit at the same time.

From April 2017, if you are making a new claim for Universal Credit, there are plans to limit support to the first two children (unless you have a multiple birth) and the first child premium may no longer be available.

Find out more in our guide Universal Credit – an introduction

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