If you work and are earning a low income, you may be entitled to extra money in the form of a benefit called Working Tax Credit, to help you make ends meet.
When they were first introduced, the aim of tax credits – which include Working Tax Credit and Child Tax Credit – was to help unemployed people on benefits to return to work. The idea was that if you’d been receiving benefits while you didn’t have a job, you could start work without getting into financial difficulties because you’d had all your benefits withdrawn.
Since their introduction, tax credits have proved beneficial to many families. Indeed, experts believe they are partly responsible for one of the biggest improvements in child poverty seen since the Second World War (the number of children living in poverty fell from 35 per cent of the child population in 1998/99 to 19 per cent in 2012/13).
Did you know? Tax credits replaced Working Families’ Tax Credit, Disabled Person’s Tax Credit and Children’s Tax Credit in April 2003.
Working Tax Credit: are you eligible?
Eligibility for Working Tax Credit depends on how old you are, how many hours of paid work you do each week, how much you earn as well as other circumstances such as whether or not you have children, a partner or a disability.
Age: You must be 16 or older to qualify for Working Tax Credit. But if you don’t have any children or you don’t have a disability, you must be 25 or older.
Work hours: To qualify for Working Tax Credit you have to be working – and paid for that work – for a minimum of 16 hours a week. This applies if you are aged 60 or older, if you’re disabled and receiving a qualifying benefit, or if you’re single and responsible for one or more children or young people.
If you’re aged between 25 and 59, you must work at least 30 hours a week to claim Working Tax Credit. And if you have a partner with one or more children, you usually have to work at least 24 hours a week between you, with one of you working for at least 16 hours a week (if only one of you works, they must work at least 24 hours a week).
You can also claim if you work at least 16 hours a week and your partner is a hospital in-patient or in prison, or if they are entitled to Carer’s Allowance or they get certain disability benefits.
People who have more than one job should add the hours from both jobs together. On the other hand, if you don’t always work for the same number of hours each week, your benefit will be calculated using the average number of hours you work.
Meanwhile, if you work fewer than 16 hours a week, there could be other benefits you may be entitled to, depending on your circumstances. If you’re already getting Working Tax Credit there may be other benefits you could get too, again depending on your circumstances. Find out more by using the entitledto benefits calculator.
Disability: Disabled people who are working at least 16 hours a week and getting a low income can get Working Tax Credit if they get certain benefits such as Incapacity Benefit, Disability Living Allowance, Personal Independent Payment, Employment and Support Allowance, Statutory Sick Pay or Attendance Allowance. The amount of time you’ve been claiming some of these benefits may affect whether or not you can claim Working Tax Credit, plus some of these benefits may stop when you start work.
If your disability makes getting a job difficult, you may be eligible for Working Tax Credit. In this instance, you may have to provide the name of a doctor or other healthcare professional who can confirm that your disability affects your chances of getting a job.
Wages: Only people who are living on an income below a certain level are eligible for Working Tax Credit, and the less you earn, the more in Working Tax Credit you may receive.
Calculating Working Tax Credit
How much Working Tax Credit you can get is based on how many different elements you receive, depending on your circumstances (the maximum annual amounts shown below are based on April 2015 rates):
Basic element: This amount is paid to everyone who qualifies for Working Tax Credit. The maximum annual amount of the basic element of Working Tax Credit is currently £1,960.
Second adult element: If you claim Working Tax Credit as part of a couple – whether your partner is of the opposite or same sex – you may also receive the second adult element, the maximum yearly amount for which is £2,010. However, not all couples are entitled to this element.
Disability element: This element applies to people who are disabled – or those with partners who are disabled – and who receive certain benefits while working for at least 16 hours a week. The maximum annual amount is currently £2,970, and you may receive it twice if both you and your partner are eligible.
Severe disability element: You could receive up to £1,275 a year with the severe disability element if you get certain disability benefits, including the higher rate of Attendance Allowance, the highest rate care component of Disability Living Allowance or the enhanced rate of the daily living component of Personal Independent Payment. Again, if you and your partner are eligible, you can get two severe disability elements.
Lone parent element: You may receive the lone parent element if you’re a single parent (the maximum annual amount is £2,010).
Childcare element: This element is based on how much you pay for childcare, including the amount you pay a registered childminder, an out-of-school club or another approved provider. The most you can claim in this element is 70 per cent of the maximum eligible weekly childcare costs, which is £175 a week for one child (for which you may receive up to £122) and £300 for two or more children (for which you may receive up to £210).
30 hour element: To get this element – which currently is an annual maximum of £810 – you have to work at least 30 hours a week, or you and your partner have a child and work 30 hours a week between you.
Because of all the different eligibility criteria and elements, working out how much you’ll get in Working Tax Credit can be complicated. To get the maximum amount of tax credits (Working Tax Credit plus, if applicable, Child Tax Credit), your entire household must currently earn £6,420 or less. If you earn more than that, your tax credits will be less than the maximum amount.
One way to get a good idea of how much you may get is to use this tax credits calculator, which gives you an estimate of how much in tax credits you may receive in total.
Applying for Working Tax Credit
There are a few ways to claim Working Tax Credit for the first time:
• Call the Tax Credit Helpline on 0345 300 3900 and ask for a claim form (Form TC600). You can also call this helpline to update your claim.
Whether you order a form online or over the phone, it takes about two weeks for it to arrive. When you receive it, you’ll have to fill in lots of details about yourself and your income for the previous tax year, including your national insurance number.
If you’re applying for Working Tax Credit, it’s a good idea to keep as much evidence of your income and other circumstances as possible, including pay slips, P45s and/or P60s, benefits statements, bank and building society statements, plus records of any other tax credits you may be getting, childcare costs and your child’s education (according to the government, you should keep all of these records from the past three years).
Once you’ve completed the form and made your claim it can take up to five weeks to process. To find out how long you may have to wait, you can use the online Where’s My Reply service.
You also have to renew your claim once a year. You should automatically be sent a renewal pack each year by the end of June – if you don’t receive one, call the Tax Credit Helpline.
How is Working Tax Credit paid?
If your claim is approved, your Working Tax Credit is paid into our bank or building society account, or a Post Office card account, by HM Revenue and Customs (HMRC). It’s paid on an annual basis, starting in the new tax year (on April 6th). However, if your circumstances change at all during the course of the year, you should tell HMRC straight away – otherwise you may end up getting too little or too much (and if you receive too much, you’ll have to pay it back).
Working Tax Credit decisions: how to appeal
If HMRC decides you’re not entitled to get Working Tax Credit, or if the amount you’re awarded is less than you think it should be, there is a course of action you can take.
First, call the Tax Credits Helpline (0345 300 3900) and ask for the decision in question to be explained to you. During this process they will check the decision and – if it’s found to be wrong – they may be able to change it.
If you’re still not happy, you can formally request for the decision to be reviewed (a process called a mandatory reconsideration). You must make this request within 30 days of the date of the decision by using form WTC/AP. Download the form, complete it and send it off to the Tax Credit Office.
If you are experiencing any of the issues covered in this guide, in the first instance call our free helpline on 0808 801 0550. Our Advisors will listen without judging and will work with you as best they can to achieve a positive outcome. If you prefer you can email: firstname.lastname@example.org. Visit our website: www.supportandcare.org. It’s full of useful information about the kind of issues we know people who work in the licensed trade face.
Other sources of information:
For free practical advice on a wide range of issues, including benefits such as Working Tax Credit.
There’s also lots more information on Working Tax Credit on this government website.
Charity providing help with all types of benefits and grants, including Working Tax Credit
NOTE: This guide is not exhaustive. It has been produced by the Licensed Trade Charity to provide you with an overview of the issue in question. If you’re experiencing problems with this issue, our Advisors are available to you.