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Tax credits income

Find out how your income relates to the amount of tax credits you can claim.

In this article
Why does my income affect tax credits? Tax credits income: what counts as income?

Why does my income affect tax credits?

As far as tax credits are concerned, your income is everything you earn from your employment as well as any income you might have from other sources. 

You must declare the income before tax and National Insurance are deducted. However, you can deduct any payments you make to a pension and any payments you make to charity through or a payroll-giving scheme from your income before you declare it. 

For example, if you earn £25,000 a year and pay £50 a month to a pension, you can declare your salary as £24,400 (£25,000 - £600).

NOTE: Existing tax credits claimants will be moved to Universal Credit in July 2019. You may be able to claim Universal Credit earlier, depending on your area.

Tax credits income: what counts as income?

You must declare all income you receive from the following sources, no matter how much this is:

  • self-employment
  • taxable social security benefits
  • student dependent grant; and
  • some miscellaneous income, such as business start-up allowance.

However, if you receive income of less than £300 during the year from sources other than these, you don't have to declare it. These other sources can include:

  • income from your savings before tax is taken off
  • investments, such as company dividends
  • pensions
  • income from property
  • income from trusts, settlements and estates; and
  • foreign income.

For example, if you have interest from savings of less than £300 in the tax year, it won't count. 

The £300 limit is shared between you and your partner if you claim tax credits as a couple. You don't have to declare income or interest from tax-free savings such as an Isa (either cash Isa or stocks and shares Isa) or any rent you receive through the rent-a-room scheme.