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Tax credits explained

Everything you need to know about tax credits

Whether you're a stay at home or working mum you could be entitled to tax credits

Tax credits can be worth thousands a year – so check out this quick guide to tax credits to find out if you qualify and how to claim them.

At a glance

  • There are two types of tax credit - Child Tax Credit and Working Tax Credit
  • Always inform the Tax Credit Office if your circumstances change
  • They are shortly being phased out to be replaced by Universal Credit
tax-credits-explained

Do I qualify for tax credits?

It’s well worth investigating tax credits – they can be worth thousands of pounds a year. How much you get depends on your household income, but people are often surprised by just what they’re entitled to.

What are tax credits?

Tax credits are payments made by the government straight into your bank account. There are two types: 

Child Tax Credit  – for people with children under 16, (or children aged 16 to 19 if they’re studying full-time in sixth form or at a further education college).

Working Tax Credit – this is based on the hours you work and how much you earn. It’s available to employees and the self-employed. And if you have children you may qualify for more.

To find out if you qualify for either of them, why not do this quick questionnaire  on the Gov.uk website? 
And to estimate how much you’ll get, check out the government’s great Child Tax Credit calculator   

How can I claim?

If you want to claim Child Tax Credit  , your best bet is to head straight for the government website. If you’re finding it all a bit mind-boggling, you can also get help from the Tax Credit Office, your benefits office or an organisation like Citizens Advice.

Get what you’re owed and avoid overpayments

Tax credits awards are only estimates – they’re finalised after you’ve renewed your claim each year. So to avoid missing out or being overpaid, make sure you tell the Tax Credit Office straight away if your circumstances change at all during the year.  (The Tax Credit Helpline is 0345 300 3900.)

Tax credits to be replaced by Universal Credit

Tax credits are being slowly phased out and replaced by Universal Credit, but you probably don’t need to worry about this for now. It’s part of a major overhaul of the UK’s benefits system, where a whole range of benefits and tax credits are being combined into one monthly ‘universal credit’ payment. To begin with, this only affects people who have just become unemployed, and only in certain areas around the country.

The Universal Credit will be paid as a single monthly payment that includes a standard allowance plus other 'elements' - for example you may get extra for children, childcare, housing or caring. 

Due for completion by 2017, it’s taking a few years to roll out, so you’ll be able to make new claims for tax credits for a quite a while. You only need to claim Universal Credit instead of tax credits if: 

• You start living with a partner who already receives Universal Credit, or 
• You lose your job and you live in one of the areas where Universal Credit is being introduced 
For obvious reasons, you can’t claim tax credits and Universal Credit at the same time!

Want to find out more?

• To find out more, visit the government’s Money Advice Service.
• You can also ring the Tax Credit Helpline on 0345 300 3900

At a glance

  • There are two types of tax credit - Child Tax Credit and Working Tax Credit
  • Always inform the Tax Credit Office if your circumstances change
  • They are shortly being phased out to be replaced by Universal Credit

Tax credits explained