Tax Credit
Tax credits are payments from the government and are designed to help people who are on a low income, meaning that some people not only pay no tax but also get payments from the government to help them.
Tax credits are available to people who are on a low income which is not enough to support themselves or their income is insufficient to support their family.
In the UK there are 2 main types of tax credit, Child Tax Credit and Working Tax Credit. It is possible for someone to be able to claim both types of tax credits, depending on their circumstances.
Child Tax Credit
Child tax credit is available to people who are responsible for at least one child or young person that lives with them. Child tax credit is available to people who are not working and have to spend their time looking after their children.
Children tax credits are usually paid when there is a new baby. Payments can continue until the 31 August after their 16 birthday. If children are under 20 and still in full-time education or approved training, child tax credit can still be paid.
The amount of child tax credit that is received can vary, depending on certain circumstances such as the number of children, age and amount spent on child care.
Working Tax Credit
Working tax credits are available to people who are on a low income. The tax credit is worked out on the hours worked and the amount of pay. The tax credit can be claimed by an employee or someone who is self-employed. IT should be noted that unpaid work does not count towards earning the working tax credit.
Working tax credit is only payable in number of circumstances. One of the circumstances is If someone is 25 years old and over and does not have children, they must work at least 30 hours a week to receive working tax credits.
Another circumstance is if someone has children, they must work more than 16 hours a week to claim working tax credit.
Tax Credit Limits
The amount of tax credit received is based on a number of circumstances, such as how many children someone is responsible for and how many hours spent working. The amount that is earned in a year is also taken into consideration and determines when tax credit is paid and when it is not.
There are limits on income before tax credits are stopped, the total annual income limits that generally apply are as follows:
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Anyone that has children it is £41,300
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Any one that is single but without children it is £12,900
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If there is a couple but without children it is £17,700