tax credits9 out of 10 families with children are entitled to tax credits – are you?

Many families are entitled to tax credits, yet many aren’t claiming them for various reasons:

  • Don’t realise they qualify for them
  • Think it is too complicated
  • Worried about having to repay accidental overpayments

The easiest way to check if you qualify for them is to utilise the HMRC online calculator or call the tax credits helpline 0345 300 3900.

Types Of Tax Credits

There are different types of tax credits, the following table shows the main elements, there are also additional elements for childcare, disability, severe disability and over 50s. As you can see from the table the main tax credits are fairly similar from the new tax year, however, the qualifying criteria is changing.

Type of tax credit Current Rate Rate of new claims from 6th April 2012
Basic family element of Child Tax Credit £545 £545
Child element of Child Tax Credit £5,110 (for two children) £5,380 (for two children)
Basic element of Working Tax Credit £1,920 £1,920
Couple element of Working Tax Credit £1,950 £1,950
30 hour element of Working Tax Credit £790 £790
Maximum amount of tax credits (for a family with two children) £10,315 £10,585

Tax Credit Changes From 6th April 2012

The income limit for Child Tax Credit is decreasing:

Currently, you can usually get some Child Tax Credit, as long as your income is not over the limit of £41,300.

From 6th April 2012, you may not qualify if:

  • You have one child, and your annual income is more than around £26,000
  • You have two children and your annual income is more than £32,200

Always check with HMRC directly, as limits can vary depending on your personal circumstances.

New working hours rules for Working Tax Credit:

If you are responsible for at least one child, you may be entitled to Working Tax Credit if you work at least 16 hours a week. From 6th April 2012, in most cases a couple’s joint working hours will need to be at least 24 hours a week.

  • If you both work, your joint weekly hours must be at least 24, with one of you working at least 16 hours a week.
  • If only one you works, that person must be working at least 24 hours a week.

However, as usual it is not completely straightforward there are some exceptions.

Your income decreases, the payment calculation changes:

If your income decreased by £2,500 or less – no change to your tax credits in the current year.

If your income decreases by more than £2,500 – your tax credits will be recalculated but the first £2,500 is discounted in the current year.

Backdated payment changes:

The backdating period for new claims and changes that result in payment increases will change from 3 months to 1 month.

50+ element:

This will cease to exist.

Over 50 working hour changes:

From 6 April 2012, you’ll need to be working the following hours to qualify for Working Tax Credit.

If you are not responsible for at least one child

You – or your partner if you’ve got one – will need to work at least:

  • 30 hours a week
  • 16 hours a week – if you’re aged 60 or over, or you’re entitled to the ‘disability element’ of Working Tax Credit

If you’re responsible for at least one child

You’ll still qualify for Working Tax Credit if either of the following applies:

  • You are single and working at least 16 hours a week
  • You are in a couple, and meet the new hours rules for couples

Tax Credits Tips

  • Always check the tax credits calculation that you receive from HMRC
  • If the tax credits calculation is incorrect contact HMRC immediately
  • Always let HMRC know immediately of any changes to your circumstances
  • Use the HMRC calculator if you aren’t sure if you are entitled or not to tax credits http://taxcredits.hmrc.gov.uk/Qualify/DIQHousehold.aspx
  • Try to avoid calling HMRC at peak times, e.g. just before tax credit deadlines, lunchtimes etc, to save being on hold for long periods
  • Make sure you inform HMRC of all other relevant income in the other income section, e.g property rentals, dividends etc.
  • Have all information to hand when contacting HMRC 0345 300 3900.