Tax Credits

Tax credits can be broken down into working tax and child tax credits

There are two types or tax credits, working tax credit and child tax credit.

Working tax credit is a benefit paid to you based on the number of hours you work and get paid for. It was introduced to encourage people to work even if they are in low paid jobs.

Child tax credits are paid to you if you are responsible for at least one young person and that young person is living with you. Being employed is not essential in order to claim child tax credits.

Tax credits are not taxable, they are paid as a form of benefit, many people are eligible for both types of tax credits. According to the government 90% of UK families are eligible for tax credits but people without children may also qualify if they are employed in a low paid job.

What affects your tax credit?

Calculating exact entitlement for tax credits is not an easy job, the following factors will be taken into consideration when your eligibility is being calculated:

  • How many children do you have living with you? It is important that any children you are claiming for are actually living with you.
  • Are you living together with someone as a couple?
  • Are you employed? How many hours do you work?
  • Do you pay for childcare?
  • Are you registered disabled or are any of the children living with you registered as being disabled?
  • Are you over 50 years old and coming off benefits?
  • What is your income? If you have a high income then you’re unlikely to be eligible for any tax credits at all.

Elements of tax credits

Both child tax credits and working tax credits have a number of layers - essentially thresholds of payment based on your situation.

Child tax credits elements

  • Basic Family Element – The basic payment, given if you a responsible for one or more children who you are living with. Maximum yearly value: £545
  • Child Element – This is paid in addition to the basic family element and is paid for each child living with you. Maximum yearly value: £2,555
  • Disabled child element – An additional payment for each child you are responsible for who is registered disabled. Maximum yearly value: £2,800
  • Severely disabled child element – Paid in addition to the disabled child element for each severely disabled child you are responsible for. Maximum yearly value: £1,130

Working tax credits elements

  • Basic element – This is paid to anyone who qualifies for working tax credits. Maximum yearly value: £1,920
  • Couples element – This is paid on top of the basic element for anyone claiming as a couple. Maximum yearly value: £1,950
  • Lone parent element – If you’re a single parent you may receive the lone parent element on top of the basic element. Maximum yearly value: £1,950
  • 30 hour element – Paid in addition to other elements if you work at least 30 hours a week. If you’re claiming as a couple with at least one child and between you both you work 30 hours a week you may also be entitled to the 30 hour element. Maximum yearly value: £790
  • Disability element – Paid in addition to other elements if you are registered disabled and in employment. Maximum yearly value: £2,650
  • Severe disability element – Paid in addition to the disability element if you have a severe disability. You may still claim for this if you’re in a couple and the person who is severely disabled is not working but the other half of the couple is working. Maximum yearly value: £1,130
  • 50+ return to work payment – An extra payment given to those aged 50 years or over and are returning to work after a period on benefits. Maximum yearly value: £1,365 (if you’re working between 16-30 hours a week) or £2,030 (if you’re working at least 30 hours a week)
  • Childcare element – An additional element if you pay registered or approved childcare. Maximum value: £175 per week (one child) or £300 per week (two or more children)

Are there income limits for tax credits?

Not everyone will receive tax credits, even if you feel you fit into some of the above categories. Tax credits are based on your income.

The tax credit department will calculate the elements you are entitled for, add them all together and then reduce this final figure, if necessary, based on your gross income.

Upper limits for claiming tax credits

This is a very rough guide to show you the income minimum income you would have to become ineligble for any tax credits

  • Single, not in work but have children - £45,000.
  • In a couple, neither work but you have children - £45,000.
  • You work at least 16 hours a week, have children and pay childcare – This is depending on the number of children you have and the amount of childcare you pay but if you earn over £65,000 a year you will not be able to claim regardless of your situation.
  • You work at least 16 hours a week, have children but pay no childcare - £45,000.
  • You work less than 16 hours a week and have children - £45,000.
  • You’re single, aged 25 or over, work 30 hours or more a week and have no children - £14,000
  • You’re in a couple, aged 25 or over and working 30 or more hours a week - £18,000.
  • You’re single, aged 16 or over, work at least 16 hours a week and have a disability - £20,000
  • You’re in a couple where one of you works at least 16 hours a week and the person who works has a disability and is aged 16 years or over - £26,000

The guide above is very rough and has been made to give people a rough idea of how much they would have to earn to become ineligible for tax credits depending on circumstances.

As you can see, if you earn £65,000 a year as a couple you are unlikely to be eligible for tax credits regardless of your circumstances.

  • We would like to remind you that the only way to check exactly what you’re entitled to is by contacting HMRC directly. You can find their contact details here.
  • There is also a quick questionnaire to check if you qualify for tax credits, which can be found here.

If you’re over 50 and returning to work after being on benefits go straight to the calculator below.

Tax credits calculator

To calculate what tax credits you are eligible for use the following HMRC calculator.

Claiming tax credits

Tax credits cannot be claimed online. To claim you must fill out a form, which you can only get from the tax credits help line.

The contact details for the tax credit help line are as follows:

  • 0845 300 3900
  • +44 2890 538 192 (if calling from abroad)
  • 0845300 3909 (textphone for customers who are deaf or hearing or speech impaired)

HMRC request that you have your NI (national insurance) number to hand.

Lines are open:

  • 8am – 8pm: Monday – Friday
  • 8am – 4pm: Saturday
  • Closed Sundays, Christmas Day, Boxing Day and New Year’s Day

If you would like to make a written enquiry about tax credits they can be sent to

  • Tax Credit Office
    Preston
    PR1 4AT

For more details about how to claim tax credits see the following page.

Reclaiming each year

The tax credit office will contact you each year about reclaiming for tax credits. If your circumstances change you may no longer be eligible for credits, or conversely you may be eligible for more.