For people who are struggling to make ends meet on
low incomes, the government can provide tax credits to supplement your income.
These tax credits come in two types. These are Child
tax credits and Working tax credits.
Child tax credits.
As the name suggests these credits are available to
families and parents, the purpose of these tax credits is to help with the
expenses of raising a family.
To be eligible for child tax credits you must be
responsible for at least one child.
Child tax credits are made up of the following:
The Child Tax Credit elements
|
What it means
|
Current maximum yearly amount
|
Family element - the basic element
|
It's the basic payment if you are
responsible for one or more children.
|
£545
|
Child element
|
This is paid for each of your children.
It is paid on top of the basic family element.
|
£2,690
|
Disabled child element
|
This is an extra payment for each
disabled child you have.
|
£2,950
|
Severely disabled child element
|
This is an extra payment for each
severely disabled child you have.
It is paid on top of any disability element. |
£1,190
|
As you can see, you get a basic amount, followed by a
payment per child and then an additional amount if your children are disabled.
However if your earnings exceed £15,860 your tax
credits will be reduced at a rate of 41% of the amount you are earning above
£15,860, for example if you earn £16,860 you will lose £410 of your tax credits
being 41% of the £1,000 above the threshold.
Working tax credits
These tax credits are available to those on low
income, but are also working.
To be eligible for working tax credits, you must be
working 30 or more hours per week if you’re at least 25 or more than 16 hours
per week if you’re at least 16 and have a child or are disabled. However, for a
couple with children, you must total 24 hours a week between you, with one of
you working at least 16 hours per week.
They are made up of the following:
The elements
|
Who it applies to
|
Current maximum yearly amount
|
Basic element
|
The basic amount if you qualify for
Working Tax Credit.
|
£1,920
|
Couples
|
Paid if you make a joint claim and is
on top of the basic element.
|
£1,950
|
Lone parent element
|
Paid if you're a single parent
bringing up children on your own.
It is paid on top of the basic element. |
£1,950
|
30 hour element
|
An extra payment if you work at least
30 hours a week.
It also applies if you're in a couple, with at least one child, and you work at least 30 hours a week between you. But one of you needs to work at least 16 hours or more a week. |
£790
|
Disability element
|
An extra payment if you work and have
a disability.
|
£2,790
|
Severe disability element
|
An extra payment if you work and have
a severe disability.
If you're in a couple, the person with the severe disability doesn't have to be working - as long as one of you is. |
£1,190
|
Childcare element
|
An extra payment if you pay
registered or approved childcare.
|
Up to 70% of
your costs, subject to a maximum limit as follows:
·
£175 per week if you're paying for
one child
·
£300 per week if you're paying for
two or more children
|
As you can see you have a basic amount that depends
on whether or not you are single or have children, followed by an extra amount
if you work more than 30 hours per week then disability and help paying for
childcare while you are out working.
The limit before you start losing working tax credits
is less generous than for child tax credits, with you only having to earn over
£6,420 before you start losing tax credits.
If you are in receipt of both working and child tax
credits you would use the lower limit of £6,420 before you start losing tax
credits.
For example if you were a single parent with 1 child
working 16 hours per week at the minimum wage of £6.08 per hour, you would be
entitled to the £545 family allowance, £2,690 for having a child, £1,920 for
the basic working tax credit and a lone parent allowance of £1,950. This adds
up to a total of £7,105 tax credits per year, and your employment would be
earning £5,059 per annum, which is low enough to retain all of your tax
credits.
To claim tax credits you will need to fill in a claim
form that can be received by calling the tax credits helpline on 0345 300 3900
but the form must be complete and sent back between the 5th April
and 31st July to be eligible.
If you require any assistance with the above, or need
some more information, be sure to call me on 01761 436436.
Mark.
