What are tax credits?

Claiming tax credits when you have a child

Tax credits are Government payments which give parents, people on low incomes and people with disabilities extra money; they’re helpful for low income households as they top up their income to help with day to day living. They’re especially beneficial when people are living on the National Minimum Wage.

Tax credits needs to be renewed on a yearly basis, which means that unless your circumstances change, the credit can still be issued. These credits are also handled by HMRC, not the Department of Work and Pensions (DWP) like other benefits.

Recently, Universal Credit has taken the place of tax credits for many people. You may not be able to start a new claim for Working Tax Credit or Child Tax Credit as they’re being replaced by Universal Credit.

What is Universal Credit?

Universal Credit is a benefit payment from the Government which supports people who need extra money. It’s for people who are on lower incomes, and can be claimed by people working full time, part-time, or who are unemployed.

Universal Credit has been introduced to replace benefits and credits, including Working Tax Credit and Child Tax Credit. These are the benefits which will be replaced by Universal Credit:

  • Working Tax Credit
  • Housing Benefit
  • Income Support
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)

You might have had a notification from the DWP already if you’ve been claiming these benefits, which will tell you what happens next.

If you’ve not heard from the DWP there’s nothing you will need to do, unless you’ve had a change in circumstances the DWP should know about.

The only benefit not currently being replaced by Universal Credit is the Severe Disability Premium. If you already receive this benefit, you cannot get Universal Credit.

How can I claim tax credits?

You can check online if you’re eligible to receive tax credits.

You will only be able to make a new claim for tax credits if you currently claim the Severe Disability Premium, or you started receiving it in the past month and you’re still eligible for it.

If you cannot make a new claim for new Working or Child Tax Credits, you may be able to apply for Universal Credit or Pension Credit.

How to claim Working Tax Credit

Eligibility for getting Working Tax Credit or Universal Credit depends on different things, such as your age, the number of hours you work every week and dependents.

You must be:

  • Working 30+ hours per week and aged between 25 and 59
  • Working 16+ hours per week and aged over 60
  • Working 16+ hours per week and disabled
  • A single parent working 16+ hours per week with one or more children
  • A couple working 24+ hours between both partners (one partner working at least 16 hours) with one or more children

It’s also possible to apply for Working Tax Credit while on leave.

How to claim Child Tax Credit

Like Working Tax Credit, Child Tax Credit is being replaced with Universal Credit for many households. It’s still possible to carry on getting Child Tax Credit if you meet the following requirements:

• If you’re already claiming tax credits - either Child Tax Credit or Working Tax Credit • Alternatively, if you’re receiving the severe disability premium benefit

You can also claim for a child up until the age of 16, or until their 20th birthday if they’re in approved education or training.

The term ‘approved education’ includes home education (if it started before the age of 16), A levels or comparable courses, vocational qualifications and NVQs up to level 3, and traineeships. Other unpaid training can be considered too.

What counts as a change of circumstances to tax credits?

If your circumstances change, it’s essential to inform HMRC as soon as you possibly can – the deadline to notify them is one month. If you don’t let HMRC know in time, you could be fined up to £3,000. Here’s what counts as a change in your circumstances:

  • A change to your working hours
  • The death of a partner
  • The death of a child
  • If a child is taken into custody
  • Changes in relationships, such as a divorce or civil partnership breaking down
  • If your child leaves home
  • If your child stops approved education/training
  • If the costs of childcare drop by £10 or more, or if you get other financial assistance with childcare
  • If childcare stops completely

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