What is the Working Tax Credit and How Does it Work?

Earnings may diminish this amount. Our section on income thresholds explains why tax credits may be reduced.

Our article on how to compute tax credits can also help.

Is working tax credit available?

You must apply to HMRC to discover out if you can claim. Depending on your situation, you may qualify for working tax credit.

Singles without kids must:

30-hour weeks are required.

25-plus

Couples without kids must:

30-hour weeks are required.
25-plus

You may be eligible for working tax credit if you’re disabled and work or if you have children.

16+, 16+ hours a week

You must be a UK resident to claim, however there are exceptions:

EEA citizen working in the UK
Crown Servant deployed overseas EEA citizen residing abroad receiving UK state pension or contribution-based Jobseeker’s Allowance (JSA).

You must claim tax benefits jointly if you’re married, in a civil partnership, or living with a partner. No self-claims allowed.

What’s your working tax credit?

Working tax credit has several ‘components’ or payments. Depending on your family situation, you may qualify for one or several aspects.

Basic working tax credit is given to everyone who qualifies. Depending on salary, this may be worth $2,070 in 2022-23.

You can also obtain extra elements, as stated in the table above.

Add your entitlements. HMRC reduces your payment as your income rises.

WC income thresholds

thresholds

Higher incomes bring less working tax credit.

If you earn over £6,770, your working tax credit will be decreased.

Every £1 over this threshold reduces tax credit by 41p.

So, if you make £8,000 a year, you’ll earn £1,230 more.

Working tax credit is lowered by 41p per pound, or 1,230 x 0.41 = 504.30.

This reduces working tax credit by £504.30 each year.

Income?

Some types of income must be reported when applying for or renewing a tax credit, regardless of income. It’s:

Money gained from employment and self-employment, taxable social security benefits, dependant grants, and miscellaneous income.

Other income must be disclosed if it’s over £300 per year. Couples share the £300 threshold. You can earn up to £300 if you claim alone without reporting these income sources.

It’s:

Before-tax savings, dividends, pensions, property, trust, settlement, and estate income, foreign income.

You don’t have to reveal tax-free Isa interest or rent from rent-a-room.

Working and child tax credits are related.

Working and child tax credits can be claimed together. If you qualify for working tax credit and have children, you can claim child tax credit.

When you apply for working tax credit, you’ll be told if you may also claim child tax credit.

If you have children, you may be able to claim:

Working tax credit’s childcare and single parents’ elements if you’re raising a child alone.
Working tax credit childcare

Working tax credit’s childcare allowance helps working parents pay for licenced childcare.

Approved childcare:

a registered childminder, nursery, or play-scheme; an out-of-school club administered by a school or local authority; an approved childcare provider.

Working tax credit covers up to 70% of childcare expenditures, up to £175 a week for one kid or £300 a week for two or more.

Our guide explains tax-free childcare and other savings alternatives.
Tax-credit renewal

Tax credits must be renewed annually. You’ll receive a renewal pack between April and June and must fill out and submit the form by 31 July.

You must have accurate, up-to-date information. Failure to do so might mean repaying any overpayments and, if HMRC considers you submitted false information to get more money, a £3,000 fine.

More:

Renew tax credits with our advice.

Changes reported

Keeping HMRC informed of changes to your income or family situation can affect your tax credit eligibility.

Some changes must be notified within one month of occurring; neglecting to do so could result in an overpayment you’ll have to repay later. If HMRC believes you’ve failed to fulfil your responsibilities, you could be fined up to £300.

More:

Read the entire list of changes you must report to HMRC.

UC claimants

UC claimants

Universal Credit will replace working tax credit, child tax credit, and other means-tested benefits.

It’s being implemented nationwide. You may have Universal Credit or will soon. Location determines when it happens.

You can’t apply for working tax credit if you already receive Universal Credit because the payments are included.

More:

What’s UC?

Working tax credit FAQ

We’ve answered some common working tax credit inquiries below.

What’s “working tax credit”?

Stop working, get laid off, or have your hours drop below the threshold to qualify for a working tax credit.

Continue receiving tax credit payments for four weeks after the adjustment.

If your hours or work change, call the Tax Credit Office.

Is wtc backdated?

Backdating tax credits by a month is common. If your circumstances change, like working less hours, tell HMRC within a month. You won’t miss out on extra pay if you’re qualified.

If you don’t advise HMRC that you’ll be paid less, they’ll make you pay back any excess money, leaving you out of cash. Tell HMRC as soon as possible.

Tax credits and life changes

Working tax credit paid when?

You can choose weekly or monthly pay. Claim forms include payment options.

A new claim can take up to five weeks to process. You’ll receive an award letter with payment details.

You may get paid earlier on bank holidays or Scottish local holidays. HMRC’s website lists early payments.

Working tax credit and other benefits?

Credits effect other advantages. You may get less if you seek tax credit.

Pension Credit Housing Benefit Income Support Income-based Jobseeker’s Allowance

Tax credits may help with costs like:

Health-related charges like medications
If you’re pregnant or have a child under 4, you could get help with vitamins, milk, food, school meals, uniforms, transport, and outings.
Death expenses
Court fines, legal fees, and prison visits Council-mandated house repairs Heat and energy expenditures

Will I get maternity tax credit?

Yes, you can earn working tax credit when on maternity leave, sick, or between employment.

First 39 weeks of maternity leave are tax-free. To qualify, you must have worked paid hours before applying.

leave.