Tax credits What are tax credits?

Parent with 2 children

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.

NOTE: Tax Credits are due to be replaced by Universal Credit. Transitional arrangements will apply. Full details are yet to be announced.

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 2016-17 for the first time will use their current family circumstances, but the income they received between 6 April 2015 and 5 April 2016.

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 £26,200 a year before tax, or £32,900 if you have two children or more. Childcare expenditure may entitle you to tax credit if your income is higher than this.  

Tax credits if you don't have children

If you don't have children, you may be eligible for tax credits if your income is around £13,250 or less before tax 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 £18,023 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.

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Last updated:

April 2016

Updated by:

Joe Elvin

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