Working Tax Credit

Working Tax Credit is paid to those who work but are on a low income. A claim for Working Tax Credit is based on the hours you work and get paid for, or expect to be paid for — as either an employee or a self-employed individual. If you are responsible for any children under 16, you could get the Child Tax Credit element of Working Tax Credit. You can also qualify if you have children aged 16 to 19, as long as they are in certain types of education or training.

The maximum Working Tax Credit rates for 2014-15 are shown in the tables below.

The withdrawal rate is the amount that is deducted from the elements described above. If the gross annual income exceeds a predetermined first threshold of £6,420 (in 2014-15) then the first (and main) withdrawal rate is 41%. This means that for every £1 earned above the threshold, 41p of the WTC entitlement is withdrawn.

¹ This means that if your income drops by no more than £2,500 from one year to the next, the fall is disregarded and your award does not rise.

And if your income decreases by more than that amount, the first £2,500 of the fall is disregarded when assessing your new award.

The disregard for increases in income — within which the Tax Credits award remains the same and is not reduced — remains at £5,000 in 2014-15.

What hours of work are needed

If you don’t have children you need to work the following hours to get Working Tax Credit:

• if you’re aged 25 or over, you need to do paid work of at least 30 hours a week;

• if you have a disability and are aged 16 or over, you need to do paid work of at least 16 hours a week;

• if you’re aged 60 or over, you need to do paid work of at least 16 hours a week.

If you have children you need to be aged at least 16 and work the following hours to get Working Tax Credit:

• if you’re single, you need to do paid work of at least 16 hours a week.

• if you’re in a couple, your joint paid working hours need to be at least 24 a week, with one of you working at least 16 hours a week.

So if you’re a couple and only one of you is working, that person will need to work at least 24 hours a week. If your joint working hours are less than 24 a week, you can still get Working Tax Credit if one of the following applies:

• one of you is aged 60 or over and working at least 16 hours a week;

• one of you is disabled and working at least 16 hours a week;

• one of you works at least 16 hours a week, and the other is entitled to Carer’s Allowance — even if they don’t get any payments because they receive other benefits instead;

• one of you works at least 16 hours a week, and the other is “incapacitated”, an in-patient in hospital, or in prison (serving a custodial sentence, or remanded in custody awaiting trial or sentence).

If you used to get the ‘50-plus element’

Up to 6 April 2012, people aged 50 or over returning to work after being on benefits got an extra 50-plus element. Now if you’re aged 50 or over and are going back to work, you’ll need to work the relevant number of hours as explained above. For example, if you don’t have children you’ll normally need to work at least 30 hours a week to get Working Tax Credit.

What happens to your payments if your income changes?

If your income in the current tax year is different from the previous year, the amount of tax credits you get may change. If your income changes in any of the following ways, then you need to tell the Tax Credit Office about it. A tax year runs from 6 April one year to 5 April the next.

If your income goes down in the current tax year by £2,500 or less, but your other circumstances stay the same, your payments won’t change for the current tax year. However, it’s still a good idea to tell the Tax Credit Office when you know your income will be lower as they will use your new income figure to work out what to pay you for the following year. If your income goes down in the current tax year by more than £2,500, your tax credits payments may go up.

If your income goes up in the current tax year by £5,000 or less, this might not make any difference to the amount of tax credits you receive for the current year. However, HM Revenue and Customs advises that it’s best to tell the Tax Credit Office straight away when you know your income will be higher. If you don’t, you may be paid too much (called an overpayment) when they work out what to pay you for the following year, and the overpayment will have to be repaid. If your income goes up in the current tax year by more than £5,000, your tax credits payments may go down.

Backdated payments

If the Tax Credit Office receives your claim on or after 6 April 2014, they will only be able to backdate it up to one month. The same goes for reporting changes to your income. If you report a change that means your income goes up, the higher amount will only be backdated by up to one month. To make sure you get your higher payments backdated to the earliest possible date, you should report all changes within one month.