Do You Qualify For Tax Credits?

Working Tax Credit and Child Tax Credit are tax-free payments made by the government.  If you work but are on a low income then you may qualify for Working Tax Credit. And, if you are responsible for a child then you may qualify for Child Tax Credit.  You may also find that you are eligible for both types of tax credit.

Our guide looks at the two main types of tax credit and when you qualify for tax credit.  We also explain how you claim tax credit and when you should make a claim.

The two types of tax credit

There are two types of tax credit in the UK.  These are:

1. Working Tax Credit – This is paid to you based on the number of hours that you work and your income. You have to be working to claim, either on an employed or self employed basis

2. Child Tax Credit – This is paid to you if you are responsible for at least one child. You don’t have to be working to claim

You may be eligible for both types of tax credit if you are responsible for a child and you are on a low income.  We’ll look at the income limits for claiming tax credits next.

Income limits for getting tax credits

It is important to remember that there are no hard and fast rules for claiming tax credits.  Whether you can claim them depends on your own income and personal circumstances.

As a very rough guide, the annual income limit that generally applies in order to claim tax credits for the tax year beginning on 6 April 2012 are:

If you have one child – £26,000
If you have two children – £32,200
If you are single without children – £13,000
If you are a couple without children – £18,000

Your income is your gross income before tax and National Insurance is taken into account.  Some state benefits also count as income as does other income including savings or investment interest, pensions and property income.  However, the actual amount of any savings you might have doesn’t affect tax credits.

However, you should bear in mind that these limits don’t apply to everyone.  You may be able to claim even if your income is higher than this – for example if you pay a significant amount in childcare or you have a disability.

In the next section we’ll look at the factors which affect the amount of tax credits that you will receive.

What tax credits will I get?

The amount of tax credits that you will receive will depend on your personal circumstances and will differ between individuals.  In general terms, the amount of tax credits that you will receive will depend on a number of factors such as:

If you are single or live with someone as a couple
How many children you have living in your household
If anyone in your household has a disability
The amount that you pay for childcare
Whether you work, and if so how many hours you work and what you earn
If you are aged over 50 and are coming off benefits

In order to establish exactly what tax credits you are entitled to, you have to make a formal tax credits claim.  Keep reading to find out how to make a claim.

How to make a tax credits claim

In order to make a tax credit claim you should contact the Tax Credit Helpline.  You can’t make an online claim or download a claim pack from the internet.  And, even though there are two types of tax credit, you only need to complete one claim form.

If you live with someone as a couple you have to make a joint tax credits claim.  You can’t decide to claim as a single person.  You’ll have to give information about both of you on the claim form.

When you contact the Tax Credit Helpline you will need information including:

Your National Insurance number
Your income for the last year (6 April 2011 to 5 April 2012).  You’ll find this on your P60 or on your tax return
Details of other benefits you receive
Details of any other income you receive including property income and savings interest
Details of any childcare payments you make to a registered or approved provider

You should receive your claim form within a week, and your completed claim form should be returned to the Tax Credit Office.  Alternatively, if you claim other benefits such as Income Support or Jobseeker’s Allowance, you can hand your completed claim form to your local Jobcentre Plus.

Next, we’ll look at when you should make your claim for tax credits.

When you should make a tax credits claim

As tax credits can only be backdated for a short period (normally up to one month) you should make a claim as soon as you think you qualify.

For example, if you have a baby on 8 April and your claim form is received on 19 September, you will only receive tax credits from 19 August.

However, you can’t claim in advance for a new baby.  You have to wait for the baby to be born and then claim straight away.  If you’re starting work and want to claim Working Tax Credit, you can do this up to seven days before your job starts.

The Tax Credit Office advise that it is sometimes worth making a claim even if you think your income is too high to get any money at the moment.  For example, you might want to do this if you expect your income to go down later in the year, perhaps because of redundancy.

Do you have any hints or tips for claiming tax credits?  If so, please share them in the comments.

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