What exactly does “working tax credit” entail?
tax credit
The Working Tax Credit is a means-tested government payment that is intended to assist working individuals with low incomes with day-to-day living expenditures.
Working tax credit could be worth up to £2,070 in 2022-23 for individuals who meet the requirements of working the required number of hours per week and earning less than the threshold amount.
The term “fundamental element” refers to this particular number when discussing the working tax credit. This is the portion that each individual who files a claim for the working tax credit receives, and it is determined by how much money you make.
Your unique set of life experiences will determine whether or not you are eligible to make a claim for any of the aforementioned additional aspects. Later on, we will explain what the additional elements are and who those elements pertain to.
Working tax credit is available to people who are either employed or self-employed; the only need is that they are working in some capacity.
During the 2022–2023 tax year, operational aspects of tax credit
The following table lays out the various components of the working tax credit and provides an estimate of how much each component will be worth in 2022-23.
You may determine the greatest amount you could be paid by simply adding up all of the factors that are relevant to your situation. You may also view rates for prior tax years by selecting the year from the dropdown menu after clicking on the menu’s dropdown arrow.
| Element | Amount |
|---|---|
| Basic payment | £2,070 a year |
| A couple applying together | Up to £2,125 a year |
| A single parent | Up to £2,125 a year |
| Work at least 30 hours a week | Up to £860 a year |
| Disability | Up to £3,345 a year |
| Severe disability | Up to £1,445 a year |
| Approved childcare | Up to £175 a week for one child; up to £300 a week for two or more children |
This sum might be adjusted depending on how much money you bring in each month. In the portion of this guide that deals with income thresholds, we discuss how and why your tax credits could be lowered.
Should I file a claim for the earned income tax credit?
income tax credit
It is not always easy to determine whether or not you are qualified to make a claim; in order to learn this information, you must submit an application to HMRC. However, if any of the following statements are true about your situation, you might be eligible for the working tax credit.
You are required to perform the following if you are childless and do not have a partner:
Put in at least thirty hours of effort per week.
be 25 or older.
If you are a member of a marriage but do not have any children, you are required to:
Put in at least thirty hours of effort per week.
be 25 or older.
On the other hand, if you are disabled and work, or if you have children, you may be qualified for a working tax credit if any of the following apply to you:
if you are over the age of 16, you are required to work a minimum of sixteen hours per week.
To make a claim, you must also be a resident of the UK; however, there are a few situations in which you may be eligible to get working tax credit even if you do not live in the UK:
you are a resident of the United Kingdom and a citizen of a nation that is part of the European Economic Area (EEA).
you are a citizen of an EEA nation who lives outside of your home country and receive a state pension or contribution-based jobseeker’s allowance from the United Kingdom you are a Crown Servant who has been posted outside of the United Kingdom (JSA).
You are required to file your tax returns along with your spouse or domestic partner if you are married to, in a civil partnership with, or cohabiting with that person. You do not have the option to make a claim on your own.
How much of a credit for working will you be able to get?
The Working Tax Credit is comprised of several distinct ‘components’ or payments. Depending on the dynamics of your family, you may be qualified for just one component, or you may be qualified for several different components.
The fundamental component is awarded to each and every person who meets the requirements for the working tax credit. Depending on how much money you make in 2022-23, this might be worth as much as $2,070 to you.
In addition, as you can see in the table that we’ve provided above, the specifics of your situation can determine whether or not you receive additional aspects.
The components to which you are entitled are compiled into one package. However, HMRC will reduce the amount you get based on how much money you make.
Occupational tax credit minimum and maximum income levels
Because of the income thresholds that are in place, persons with higher salaries will receive a lesser amount of working tax credit than those with lower incomes.
If you have an annual income that is greater than £6,770, the amount of working tax credit that you are entitled to get will begin to be reduced.
If your annual income is more above this threshold, the amount of tax credit you receive will reduce by 41 pence for each additional pound you earn.
Therefore, if your annual salary is £8,000, you will be earning over this level by a total of £1,230.
Your working tax credit will be decreased by 41 pence for each pound you earn, which can be calculated as 1,230 multiplied by 0.41 to get 504.3 pence.
This indicates that there will be a reduction of £504.30 in the maximum amount of working tax credit during the course of the year.
What exactly is considered income?
Whether you are asking for a tax credit for the first time or renewing one you already have, there are some sorts of income that you are required to record, regardless of how much money you make. These include:
money obtained via job and self-employment taxable social security benefits student dependent grant other forms of income, such as a business start-up allowance money acquired through employment and self-employment taxable social security benefits student dependent grant other forms of income
Other sources of income are not required to be reported until they bring in more than £300 annually for the taxpayer. Take into consideration that if you are filing a claim with your partner, the £300 threshold will be split between the two of you. If you file your claim on your own, you can earn up to £300 without having to disclose these other sources of income.
These include:
investment income that is obtained before taxes, such as corporation dividends, pension income, income from property, income from trusts, settlements, and estates, and income from other countries.
You are exempt from having to report income if you have earned interest on tax-free savings (interest that was earned by money invested in Isas) or rent through the rent-a-room programme.
What is the relationship between the working tax credit and the child tax credit?
The Working Tax Credit and the Child Tax Credit can both be claimed concurrently if the qualifying conditions are met. If you are eligible for the working tax credit and you are the primary caregiver for one or more children, it is likely that you will also be eligible for the child tax credit.
You do not need to submit separate applications for the working tax credit and the child tax credit; rather, you will find out if you are eligible for both at the time you submit your application for the working tax credit.
One or more of the following additional working tax credits may be available to you if you have dependent children:
if you are paying for childcare, you are eligible for the working tax credit’s childcare component. if you are raising your child by yourself, you are eligible for the working tax credit’s single parents’ component.
The portion of the working tax credit that goes for child care
The portion of the working tax credit known as the childcare component is an additional allowance that assists working parents who spend money on qualified daycare.
Included in the list of approved child care are:
a registered childminder, nursery, or play-scheme; an after-school club on school grounds that is managed by a school or local authority; a childcare programme that is run by a provider who has been approved.
You have the ability to claim up to 70 percent of the costs associated with childcare through the working tax credit’s childcare component, up to a maximum of £175 per week for a single kid and £300 per week for two or more children.
Renewing your entitlement to a tax credit
In most cases, you will be required to renew your tax credit on an annual basis. You should expect to receive a renewal pack between the months of April and June, and you have until the 31st of July to either fill out the form and send it back in, or give the Tax Credit Office a call.
You are responsible for ensuring that all of the information you have is accurate and up to date. If you fail to do so, it is possible that you may be required to reimburse any overpayments that you receive, and if HMRC believes that you purposefully submitted the inaccurate information in order to get more money, you could be fined up to £3,000 for the offence.
Notifying others of any changes to your situation
It is vital to keep HMRC up to speed with any changes that occur to your income or family circumstances. This is because some factors could modify the amount of tax credits to which you are eligible.
If you fail to report certain changes within a month of when they took place, you run the risk of being given an overpayment that you will be required to repay at a later date. Additionally, if HMRC believes that you have failed to fulfil your responsibilities, you could be subject to a fine of up to £300.
In the event that you apply for Universal Credit
Universal Credit
The Working Tax Credit, the Child Tax Credit, and a number of other benefits that are means-tested will eventually be replaced by the new type of government assistance known as Universal Credit.
It is being implemented gradually in different parts of the country at this time. It’s possible that you have already been switched over to Universal Credit, or that the switch will take place very soon. Where you reside will determine when this event takes place.
You are not eligible to apply for working tax credit if you are currently receiving Universal Credit since the payments that you would get if you were approved for working tax credit are already included in your Universal Credit payment.
