This may be previous year income or current year income actual or estimated depending on the circumstances. Daily vs. Many tax credits calculations are done using annual rates whereas the legislation and the tax credits computer system requires a daily rate calculation.
The simplest calculation is where there is only one relevant period, with no changes to the maximum rate throughout the year. Example 1 shows the same award calculated using both daily and annual rates. In this example, using daily rates results in a slightly higher entitlement. This is a result of rounding up daily rates to the nearest penny. As long as advisers are aware of the differences that may arise when calculating using annual figures, it is a perfectly acceptable method. Where there is a change in circumstances which alters the rate of tax credits or the elements to which a claimant is entitled, then the calculations must be done for each relevant period as Example 2 shows.
The examples in this section have all calculated a total tax credits figure. To do this, an understanding of how the elements are tapered away is crucial. That order is:. This time the amount of each element is included for the relevant period. This amount is first of all deducted from the WTC basic element.
Her tax credits entitlement would be reduced as follows:. One other point which this demonstrates is the importance of including all elements in a calculation. Technically, the legislation requires two small calculations to be done in order to determine the childcare figure to use in the calculation.
Where average weekly childcare costs exceed the maximum rate, then the steps above need to be followed as shown by Example 3. The actual costs figure can simply be used in the calculation of maximum rate as Example 4 shows. Calculating income cut off points. Sometimes it is useful for advisers to be able to calculate the cut-off point for a specific group of tax credits claimants, and as the family element of tax credits is no longer protected until income reaches a certain level, every claimant will have a different income level at which their tax credits will reduce to Nil.
Calculating tax credits and earlier years. For WTC only claimants, the calculation of tax credits in and earlier years was as outlined in the previous section and for that group nothing has changed calculation wise although thresholds and taper percentages have changed over the years. The main change is for claimants who are entitled to CTC. In and earlier years there was a second income threshold. If those circumstances had applied in , the calculation would have been as set out in Example 6.
Calculating the second income threshold. Such families would have a higher second income threshold that needed to be individually calculated. It is complicated to work out how much Working Tax Credit you can get so we suggest using the Turn2us Benefits Calculator which can calculate how much you may be entitled to.
Your maximum entitlement is made up of different parts based on your personal circumstances, for example:. You may not get your maximum entitlement if you have other income. Savings do not affect your claim but interest from savings is included in your income. Getting Working Tax Credit means you won't be affected by the Benefit Cap which limits the total amount in some benefits that people of working age can receive.
Working Tax Credit will be paid directly into your bank or building society or through the Payment Exception Service if you are unable to open or manage one of these or a similar account. Working Tax Credit is usually paid every four weeks but you can choose to have it paid weekly by asking HMRC to change your payments. Working Tax Credit counts as income when working out your entitlement to most other means-tested benefits.
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Back to A-Z Help pages index How tax credits work Please note: You are no longer able to make a new claim for tax credits.
This guide remains for people who are still claiming tax credits. What are tax credits? Initial and final award The tax credit system has two stages: an initial award and a final award. Register Login. Enter your email address or username. Enter your password Password was successfully restored. Please check your inbox. Log in Forgot your password? Reset here. Created an account using Google or Facebook? Use our social login. Send reset password link.
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Working Tax Credit. Hours you work You must work a certain number of hours a week to qualify. Print entire guide. Brexit Check what you need to do.
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