What is working tax credit?
Working tax credit is a government payment to help with day-to-day expenses for working people on low incomes.
If you work a certain number of hours a week and have an income below a certain level, you could get up to £1,960 a year in working tax credit.
The £1,960 figure is called the ‘basic element’ of working tax credit. This is the part that everyone claiming working tax credit receives, and is based on how much you earn.
There are a number of extra elements that you might also be able to claim, but they depend on your circumstances. We’ll explain what the extra elements are, and who they apply to, later.
You can get working tax credit whether you're employed or self-employed – you just need to be working.
The table below shows the different working tax credit elements and how much each element is worth in 2019-20.
To find out the maximum amount you might be paid, you can add up all of the elements that apply to you. You can also see rates for 2018-19 by changing the year.
|Basic payment||£1,960 a year|
|A couple applying together||Up to £2,010 a year|
|A single parent||Up to £2,010 a year|
|Work at least 30 hours a week||Up to £810 a year|
|Disability||Up to £3,165 a year|
|Severe disability||Up to £1,365 a year|
|Approved childcare||Up to £175 per week for one child; |
up to £300 per week for two
or more children
Depending on how much you earn, this amount may be reduced. We explain how and why your tax credits may be reduced in our section on income thresholds.
Our guide how to calculate tax credits can also give more information on how to figure out what you'll get.
Am I eligible to claim working tax credit?
It can be hard to know for sure whether you’re eligible to claim and you have to apply to HMRC to find out. But if the following circumstances apply to you, you might be able to claim working tax credit.
If you're single and don't have children you must:
- work at least 30 hours a week.
- be 25 or older.
If you're in a couple and don't have children you must:
- work at least 30 hours a week.
- be 25 or older.
However, if you're disabled and work, or if you have children, you might be eligible for working tax credit if:
- you're 16 and over
- you work at least 16 hours a week
You also need to be a UK resident to claim, but there are a few circumstances where you can receive working tax credit without living in the UK:
- you’re a citizen of a country in a European Economic Area (EEA) and you work in the UK
- you’re a Crown Servant and have been posted overseas
- you’re a citizen of an EEA country living abroad and you receive a UK state pension and/or contribution-based Jobseeker’s Allowance (JSA).
If you’re part of a couple – ie married to, in a civil partnership with or living with a partner – you must claim tax benefits jointly. You can't opt to claim on your own.
Working tax credit: how much will you get?
Working tax credit is made up of a number of different 'elements' or payments. You may be eligible for just one element or for a few different elements, depending on your family circumstances.
Everyone who qualifies for working tax credit receives the basic element. This is worth up to £1,960 during 2019-20, depending on your income. This amount is unchanged from 2018-19.
In addition, you can receive extra elements depending on your circumstances, as we've shown in our table above.
The elements you are entitled to are added together. But HMRC reduces the amount you get the higher your income is.
There are income thresholds in place which mean that those on higher incomes will receive a reduced amount of working tax credit.
The amount of working tax credit you receive will start to be reduced if you earn more than £6,420 a year.
For every £1 of income over this threshold you earn per year, the amount of tax credit paid decreases by 41p.
So, if your salary is £8,000 a year, you’ll be earning £1,580 over this threshold.
For each pound, your working tax credit will be reduced by 41p – which can be worked out as 1,580 x 0.41 = 647.80.
This means that the maximum amount of working tax credit would be reduced by £647.80 over the year.
What counts as income?
When applying for tax credit, or renewing your tax credit, there are some types of income you have to report – no matter how much you earn. These are:
- money earned through employment and self-employment
- taxable social security benefits
- student dependent grant
- miscellaneous income, such as a business start-up allowance.
Other income sources only have to be reported if you earn more than £300 a year from them. Note that if you’re claiming as part of a couple, this £300 threshold is shared between both of you. If you claim alone, you can still earn up to £300 without declaring these sources of income.
- income earned on your savings, before tax
- investments, such as company dividends
- income from property
- income from trusts, settlements and estates
- foreign income.
How are working tax credit and child tax credit linked?
It's possible to claim working tax credit and child tax credit at the same time. If you qualify for working tax credit and are responsible for one or more children, you'll probably be able to claim child tax credit, too.
When you apply for working tax credit, you'll be told if you can apply for child tax credit – you don't have to apply for them separately.
If you have children, there is extra working tax credit you may be able to claim, such as:
- the childcare element of working tax credit if you are paying for childcare
- the single parents' element of working tax credit if you are raising your child by yourself.
Childcare element of working tax credit
The childcare element of working tax credit is an extra allowance to help working parents who spend money on approved childcare.
Approved childcare includes:
- a registered childminder, nursery or play-scheme
- an out-of-hours club on school premises run by a school or local authority
- a childcare scheme run by an approved provider.
With the childcare element of working tax credit, you can claim up to 70% of childcare costs to a maximum of £175 a week for one child, or £300 a week for two or more children.
Find out more: Tax-free childcare and other ways to save – our guide outlines your childcare options.
Renewing your tax credit
You’ll usually have to renew your tax credit every year. You’ll receive a renewal pack between April and June, and you’ll have to either fill out and return the form, or call the Tax Credit Office, by 31 July.
You must make sure all of your information is correct and up to date. Failure to do so could mean you’ll have to repay any overpayments you receive and, if HMRC thinks you purposely gave the wrong information in order to get more money, you could be fined up to £3,000.
Find out more: renew your tax credits – our guide explains how to do it.
Reporting changes to your circumstances
It's important to keep HMRC up to date with changes to your income or family circumstances, as some things could change how much you’re entitled to from tax credits.
Some changes must be reported within one month of taking place - failing to do so could end up with you receiving an overpayment that you’ll have to pay back later, and if HMRC thinks you’ve failed to fulfil your responsibilities you could be fined up to £300.
Find out more: tax credits and changes in circumstances - read the full list of the important changes you must update HMRC about.
If you claim Universal Credit
Universal Credit is the new government benefits model that will eventually replace working tax credit and child tax credit, plus several other means-tested benefits.
It’s being rolled out gradually across the country. You may already have been moved onto Universal Credit, or will be moved onto it soon. When it happens depends on where you live.
If you already receive Universal Credit, you can’t apply for working tax credit, as the payments you’d receive are included in your Universal Credit payment.
Find out more: what is Universal Credit?
Working tax credit: your questions answered
We've answered some of the most common questions you might have about working tax credit below.
What is 'working tax credit run on'?
You may receive a working tax credit run on if you stop work, get laid off, or your hours drop below the threshold to qualify.
'Run on' is where you continue to receive the tax credit payments for four weeks after the change.
If your hours increase, or you get a new job within this time, call the Tax Credit Office to let them know.
Is working tax credit backdated?
Tax credit can usually be backdated by up to a month. That’s why, if your circumstances change – for example, you start working fewer hours – it’s important to tell HMRC within a month of it happening. That way, if you’re eligible to get paid more, you won’t miss out.
If the change means you’ll get paid less, but you don’t tell HMRC, they’ll make you pay back any extra money you’ve been given, which could leave you out of pocket. So, again, it’s best to tell HMRC as quickly as possible.
Find out more: Tax credits and change in circumstances
When is working tax credit paid?
You can choose to either get paid once a week, or once every four weeks. The option for when your payments are is on the claim form you fill out.
It can take up to five weeks to process a new claim, so you may have to wait a while. You’ll be sent an award notice in the post to tell you when your first payment will be made.
You might get paid slightly earlier whenever there’s a bank holiday, or some local holidays in Scotland. HMRC has a list of all early payments on its website.
Does working tax credit affect other benefits?
Tax credit can affect other benefits. If you claim tax credit, you might find that you get less:
- Housing Benefit
- Income Support
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Pension Credit.
However, claiming tax credit might mean you get extra help with certain costs, such as:
- prescriptions and other health-related costs
- if you’re pregnant or have a child under 4, you could get help towards the cost of vitamins, milk and food
- school-related costs, such as school meals, uniforms, transport and trips
- funeral costs
- court fees, legal costs and prison visits
- home repairs from your council
- the costs for heat and energy in your home.
Will I get working tax credit while I’m on maternity leave?
Yes, you can get working tax credit for periods when you don’t work, and that includes while you’re on maternity leave, off sick and are in-between jobs.
You can get working tax credit for the first 39 weeks of your maternity leave. To qualify you must have been in paid work and have worked the qualifying number of hours before you go on leave.