Overview of Tax Credits in UK

Tax credits in the UK are a form of financial assistance paid to individuals by the government. Tax credits come in two specific types, child tax credit and working tax credit. Child tax credit is for individuals who are mainly responsible for at least one qualifying child. Working tax credit is for those who are either in employment or are self-employed but are receiving a low income. Those who are part of a couple must submit a joint tax credits claim and do not have the option of submitting individual claims.

Child tax credit

To be eligible for child tax credits, an individual has to have at least one child normally living with them at their address. The benefit can be comprised of up to three component parts. The family element of child tax credit is not related to the number of children living in the house. It may be increased, however, where at least one of the children is less than one year old, or where childcare costs are being incurred. The child element of child tax credits is directly related to the number of children in the household. The third potential element of child tax credit which may apply is where one or more of the children has a qualifying disability and disability living allowance is being paid.

Working tax credit

In order to be eligible for working tax credits, an individual has to be over sixteen years old and earning money from working. This can either be as an employee or in the form of self-employment. Those who are over sixteen may be eligible for working tax credit provided they are working more than sixteen hours a week and are either responsible for at least one child or have a registered, qualifying disability. Alternatively, those over twenty-five require to be working a minimum of thirty hours per week in order to qualify. Working tax credit may also be payable to those over the age of fifty who have returned to work following a period of at least six months’ registered unemployment.  

Eligibility for working tax credits is determined by Her Majesty’s Revenue and Customs (HMRC) on an annual basis. Income is considered from the previous tax year, the 6th April one year to 5th April the following year, inclusive. Claimants will also be required to provide details of expected income levels for the tax year in which the claim is submitted.

Tax credits are normally only available to British citizens, living and working in the UK. There are, however, some exceptions to this rule, including government employees working overseas, EU residents in receipt of a UK pension payment or other qualifying UK benefit and EU citizens living and working in the UK.