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What are tax credits?

Tax credits are payments from the government. If you're responsible for at least one child or young person, you may qualify for Child Tax Credit. If you work, but are on a low income, you may qualify for Working Tax Credit. You can often get both types of tax credits. They aren't taxable.

Who can get tax credits?

Nine out of ten families with children qualify for tax credits, but you don't need to have children to claim. You may also qualify if you are working and on a low income.

What type of tax credits can you get?

You may get one of the following - or both.

Working Tax Credit

Working Tax Credit is based on the hours you work and get paid for, or expect to be paid for. You can claim whether you're an employee or a self-employed person. But unpaid work doesn't count for Working Tax Credit.

Child Tax Credit

Child Tax Credit is paid to you if you are responsible for at least one child or young person who normally lives with you. You don't have to be working to claim Child Tax Credit.

How much do you get?

The amount of tax credits you get depends on things like:

  • how many children you have living with you
  • if you live with someone as a couple
  • whether you work - and how many hours you work
  • if you pay for childcare
  • if you or any child living with you has a disability
  • if you're aged 50 or over and are coming off benefits

Your payments also depend on your income. The lower your income, the more tax credit you can get.

What are the income limits for getting tax credits?

The total annual income limits that generally apply before your tax credits are reduced or stopped altogether are as follows:

  • if you have children it is £41,300
  • if you're single without children it is £12,900
  • if you’re in a couple without children it is £17,700

It's important to know that:

  • these income limits don't apply to everyone - for example if you have a large family and pay a lot in childcare, or have a disability, the income limit could be higher
  • you need to make a claim to get a definite answer to how much you are entitled to

You can get a better idea of how much income you can have before your tax credits are reduced or stopped by using:

  • 'at a glance' entitlement tables for tax credits - follow the link below that applies to your situation
  • a quick online questionnaire - this will tell if you're likely to qualify for tax credits based on different income limits, but it won't tell you how much you can get

It's worth knowing that the entitlement tables are only a rough guide to how much tax credits you could get for the current tax year - 6 April 2011 to 5 April 2012. They will be updated with the amounts for the next tax year on 6 April 2012.

How tax credits work

You'll usually need to make a joint claim for tax credits if you are any of the following:

  • married
  • in a civil partnership
  • living together as if you were married or in a civil partnership

You can only make a single claim if you don't fall into one of these groups.

The Tax Credit Office will pay tax credits directly into your bank, building society, Post Office® or National Savings account if it accepts Direct Payment - either weekly or every four weeks.

Who gets the tax credits payments?

If you're both working and you both qualify for Working Tax Credit, you can decide which one of you will get the payments.

If you’re claiming Child Tax Credit and you’re in a couple you need to decide which one of you is the children’s main carer. If you’re the main carer then the money will be paid to you.

How tax credits payments work

The tax credits payments you receive from the Tax Credit Office are based on your current personal circumstances and your income (before tax and National Insurance) from the tax year that ended on 5 April 2011.

If you’re making a new claim for tax credits your payments will usually run from the date of your claim to the end of the tax year. For example, if you make a claim on 10 November 2011, your payments will be worked out from that date until 5 April 2012. Claims can usually be backdated for up to three months - sometimes longer - from the date the Tax Credit Office received your claim form.

Renewing your tax credits

Each year during April, May or June the Tax Credit Office will write to you asking you to:

  • check the information they have about your personal circumstances
  • confirm the income you received in the year that has just ended

This is known as 'renewing' your tax credits claim. The deadline for renewing is usually 31 July.

Why you need to renew your tax credits claim

You need to renew to make sure that the payments you've been getting were correct. It also allows the Tax Credit Office to base your payments for the year ahead on the right amount of income.

Sometimes the Tax Credit Office will have paid you too much or not enough. If this happens they will make an adjustment to make sure that your payments are correct. Any payments made from 6 April 2012 to the date on which you renew your claim are temporary or provisional and if you don't renew, you may be asked to pay them back.

Changes at home and work

If your circumstances change at any time this can affect the amount of money you should be getting. So please contact the Tax Credit Office as soon as possible to tell them about any changes. You can contact the Tax Credit Office by calling the Tax Credit Helpline.

Provided by HM Revenue and Customs

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