Tax credits What are tax credits?
Working tax credits help top up your annual income
Tax credits are state benefits that provide extra money to people responsible for children, disabled workers and other workers on lower incomes.
There are two types of tax credits – child tax credits and working tax credits. You can find out more about each type of tax credit on the relevant page. You might be eligible for one or both of them, depending on your circumstances.
Tax credits are tax-free and you don't have to be paying National Insurance or tax to qualify, but they are means-tested. So, whether you qualify and how much you get depends on your household's income and circumstances.
Tax credits: How much will I get?
How much tax credit you get is initially based on your current circumstances and your income during the previous tax year.
So, people applying in 2012/13 for the first time will use their current family circumstance, but the income they received in between 6 April 2011 and 5 April 2012.
If your income has fallen since last year, you can ask Her Majesty's Revenue and Customs (HMRC) to revise your award based on your estimated current year income.
However, be careful not to overestimate the fall in your income otherwise you may be overpaid tax credits which you'll have to pay back at the end of the year.
Tax credits if you have children
If you have one child you may be eligible for some tax credits if your household income for tax credits purposes is less than £30,000 a year before tax, or £50,000 if you have two children or more. Your childcare expenditure may affect the amount you receive.
Tax credits if you don't have children
If you don't have children, you may be eligible for tax credits if your income around £13,000 before tax or less if you are single and work at least 30 hours a week. If you are part of a couple and work at least 30 hours a week, the income threshold for both people is £18,000 a year before tax.
If you are a disabled worker
If you are a disabled worker you might still qualify for working tax credit even if you earn more than this.
- For any tax query, call our experts on the Which? Money Helpline
- Try the Which? Tax Calculator
- Take a look at our guide to tax and your children