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Posted in: Finance Last updated: 06 Apr 2016

Your guide to Tax Credits

Could you be entitled to a bit of extra money each month? Tax Credits are a tax-free payment from the government that could ease the pressure on your family finances.

Child with hands covered in paint
Tax Credits Guide illustration money

Two types of Tax Credits

There are two types of Tax Credits available to people living in the UK; Child Tax Credits (CTC) and Working Tax Credits (WTC). Anyone in work can potentially qualify for Working Tax Credits. To claim Child Tax Credits you must care for at least one child.

Am I eligible?

Whether you can claim Tax Credits, and how much you receive depends on your personal circumstances. Factors include:

  • How much you earn
  • Your age
  • How many children you have
  • The hours you work
  • How much you pay for childcare
  • If anyone in your family is disabled

The calculation is quite complicated, but as a rough guide: if your household income is higher that around £26,000 you probably won’t qualify. Although it’s worth noting that if you pay for registered childcare, then the income threshold is higher. Working Tax Credits can help you with up to 70% of your childcare costs.

You’ll find a simple tool on the HMRC website that helps you work it all out. If you think you’re eligible, we explain more about the process below.


Working Tax Credits

First of all, calculate if you qualify for Working Tax Credits. We’ve listed all the elements here, along with the maximum benefit you can get. Please note childcare is worked out separately and you’ll find it lower down this page.

Rates and thresholds April 2016:  
Basic element £1,960
Couple and lone parent element £2,010
30 hour element £810
Disabled worker element £2,970
Severe disability element £1,275

Child Tax Credits

Whether or not you can claim Child Tax Credits depends on your personal circumstances, and you don’t need to be working. If you’re single or separated, then the money will go to the main carer. We’ve listed all the elements that make up Child Tax Credits here along with the maximum benefit.

Rates and thresholds April 2016:  
Family element £545
Child element £2,780
Disabled child element £3,140
Severely disabled child element £1,275

The Childcare element of Working Tax Credits

Working Tax Credits (WTC) pay the ‘childcare element’ of Tax Credits. And they are worth applying for. Depending on your income, you can get help with up to 70% of your childcare costs.

  • All tates and thresholds are correct as of April 2016
  • The maximum eligible cost for one child is £175 per week
  • The maximum eligible cost for two or more children is £300 per week
  • The maximum percentage of eligible costs covered is 70%

Multiply the weekly figure x 52 to calculate your average annual childcare costs.

"After school clubs and holiday clubs all count as childcare costs."
Tax Credits Guide illustration money

How much money can I expect to get?

First make a list of all the Tax Credits elements relating to your family circumstances from the tables above and add them together. This will give you the amount of the maximum possible award, but how much you will actually get will depend on your household income. The figure will be reduced (or ‘withdrawn’) at a rate of 41p for £1 you earn over £16,105 for the tax year 2016-2017.

The calculation is complicated, so use our Tax Credits calculator to help you work it out.

How do I claim Tax Credits?

Call the Tax Credits helpline on 0345 300 3900 to request a claim pack, or visit gov.uk and search for 'tax credits calculator' which will allow you to check your entitlement and order a claim form online.

You’ll need this information to hand when you call:

  • Your National Insurance number
  • The salary or self-employed earnings of every adult in your household (not including adult children) for the previous tax year (April 2015-April 2016).
  • Details of any benefits you receive, such as Contributions based Jobseeker’s Allowance or Carer’s Allowance.
  • Details of any other income, for example interest on savings, pensions or rental income. Child maintenance isn’t considered income for Tax Credits calculations.
  • Your childcare costs with an approved or registered provider.
  • Your bank details. If you’re successful with your claim, payments will go directly into this bank account.

Get your claim in as soon as possible, as payments will only be backdated by one month.

Please remember

Tax Credit rules are complicated and the amounts shown may vary depending on your personal circumstances. This information is meant as a guide only and based on information that’s correct as at 06/04/2016. We can’t guarantee it will always be accurate.

Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions.

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