Tax credits

If you’re struggling for money, the good news is that there are various types of government help available to you - including tax credits. Here, The Mix guides you through benefits such as Child Tax Credit and Working Tax Credit.

Understanding tax credits - working tax credit and child tax credit

Jump to tax credits section:

  1. How much will I get in tax credits?
  2. How often are tax credits paid?
  3. How do I claim?
  4. Working tax credit – how do I qualify?
  5. Child Tax Credit – how do I qualify?
  6. Universal Credit and changes to tax credits
  7. How can I appeal a Tax Credits decision?
  8. Where can I go for help with tax credits?

What are tax credits?

Simply put, tax credits are a government scheme to help people who are struggling with money for a number of reasons – for example if they’re on a low income, acting as a carer for children or people who are disabled. There are two types of tax credit:

  • Working Tax Credit is for people who work above a certain number of hours but are still on a low income
  • Child Tax Credit is for people on a low income with responsibility for one or more children or young people

 

Tax credits are often considered as a benefit, because they’re based on your circumstances and how much you earn. However, unlike benefits such as universal credit, tax credits are managed by HMRC instead of Department of Work and Pensions.

How much will I get in tax credits?

Tax Credits are means-tested. The amount you are entitled to will depend on your annual income and your partner’s income (if you are a couple who live together), as well as other circumstances such as:

  • How many hours you work
  • Whether you have children/dependents

Each case is different, which means that you’re unlikely to get an accurate estimate before your claim has been processed. But you can get a rough idea of what you could be entitled to by using this Tax credits calculator.

For a more accurate idea, contact your local Citizens Advice Bureau, or call the Tax Credit Helpline (0345 300 3900, Textphone: 0345 300 3909). Bear in mind the Tax Credit Helpline can sometimes have long waiting times and may cost you a lot to call from a mobile, so try and use a landline.

How often are tax credits paid?

Both types of tax credits are usually paid directly into your account every four weeks but you can choose to have it paid weekly by asking HMRC to change your payments.

It’s worth noting that if you’re claiming for the first time, it can take up to 5 weeks for HMRC to process a new claim – so be patient. They’ll send you a letter that confirms the date for your first payment.

How do I claim?

You need to get a claim form by phoning HM Revenue and Customs (HMRC) Tax Credits Helpline or by ordering a form online. You need to then send the completed form back to HMRC Tax Credits Office – the same claim form is used for both Working Tax Credit and Child Tax Credit. It can be a lengthy process, but it’s worth it to help you on the path towards getting the help you need.

If there is a change in your circumstances then it’s important to let HMRC know as soon as you can. If they continue to overpay you, the chances are that you will have to repay this – which can be difficult if you’ve already spent the money. Some examples of changes you should tell HMRC about include:

  • Moving in with a partner
  • Any change in your (or your partner’s) income
  • Change in the number of children living with you

 

Detailed rules about tax credits are available on the Gov.uk website. If you’re on a low income, you may be able to get help on claiming for tax credits from the Low Income Tax Reform Group.

Working tax credit – how do I qualify?

To be able to claim working tax credit, you need to be working a certain number of hours per week, but fall below a certain threshold that is classed as “low income”. It’s actually harder for under-25s to claim Working Tax Credit, as you need to be:

  • Disabled and working more than 16 hours a week
  • A single parent and working more than 16 hours a week
  • In a couple with children, working between you more than 24 hours a week. One of you must work at least 16 hours a week

 

If you’re 25 or over, you can qualify just by being on a low income and working 30 hours a week – you don’t have to be disabled or a parent. Some parents can get help with childcare costs through Working Tax Credits, however you won’t be able to claim if you’ve signed up to receive tax-free childcare.

Child Tax Credit – how do I qualify?

As with most types of benefits, Child Tax Credits are steadily being replaced by Universal Credit. Generally, you’re eligible to claim Child Tax Credit if you’re a parent or full-time carer and:

  • have the main responsibility for at least one child under 16
  • have responsibility for a 16-20 year-old in full-time further (not higher) education or a government-approved training programme

You don’t have to be working to claim (as you do with Working Tax Credits), but you’ll need to provide HM Revenue & Customs (HMRC) with details of yours and your live-in partner’s income. You will only be able to claim for up to two children unless an exception applies, which you may get if:

  • Your children were born before 6 April 2017
  • They are disabled (Disabled Child element only)

 

You qualify for an exception in Child Tax Credit or special circumstances apply in Universal Credit
The income that you can have and still claim Child Tax Credit varies depending on your personal circumstances. You can use the Turn2us Benefits calculator to see if you are likely to qualify.

Universal Credit and changes to tax credits

Working Tax Credit and Child Tax Credit (along with some other benefits) are gradually being replaced by a benefit called Universal credit. This means that in some areas you might need to claim UC instead of tax credits.

Please see our guide on Universal Credit for more information.

How can I appeal a Tax Credits decision?

If you’ve applied for Tax Credits and have been denied, or you don’t think you’re being paid your full entitlement, you can appeal. The first step to take if you disagree with the decision made on your claim you can usually ask for it to be looked at again known as a ‘mandatory reconsideration’.

If you still disagree with the further decision you can then appeal to an independent tribunal. You will only be given 30 days to challenge a decision, so it is important to seek advice and act quickly. However the same appeal process does not apply if the HMRC make a decision that you have been overpaid tax credit. You should seek advice as soon as possible if you are in this situation.

Learn more about benefits appeals

Where can I go for help with tax credits?

Getting benefits and making sense of what you’re entitled to is often a frustrating process – but it’s a good step to take if you think you may be entitled to it and you’re struggling to make ends meet. If you’re feeling worried or confused whilst applying, there are lots of places you can go to for help:

  • Citizen’s Advice know all about the benefits system and can help you understand your rights. You can visit your local bureau to get face-to-face advice and support. You must remember to bring along details of your benefits and general financial situation.
  • For more detailed information on tax credits, visit the Gov.uk website.
  • If you want to challenge a decision about your benefit, you can appeal.

Unfortunately we are unable to offer specific money advice at The Mix, but we can give emotional support and guide you to the best places for expert advice if you give us a call on 0808 808 4994

Next Steps

  • Use the Turn2Us calculator to work out what benefits and grants you're entitled to, or call their helpline on 0808 802 2000
  • Chat about this subject on our Discussion Boards.
  • Need help but confused where to go locally? Download our StepFinder iPhone app to find local support services quickly.

By Holly Turner

Updated on 29-May-2021