Working Tax Credit: am I eligible, how to apply and how to renew

Working Tax Credit can be a massive help to those on low incomes. In this guide we explain how much they are worth and how you can apply if you’re eligible.

What is Working Tax Credit?

Working tax credit is designed to make work pay, topping up low incomes so that people in work are better off than they would be on benefits.

It’s not a perfect system and it’s highly complex, so it’s essential you take the time to understand what Working Tax Credit you are entitled to, how to claim Working Tax Credit and how to renew.

Am I eligible for Working Tax Credit?

The credits you receive depend on your circumstances.

To qualify, you must meet the minimum threshold for hours worked, although the number of hours you have to put in depends on your situation.

If you are 25 or over, you need to work at least 30 hours a week.

However, some groups only need to work 16 hours a week to qualify, including anyone responsible for a child or young person, anyone over 60, and anyone who is disabled (as long as they are entitled to certain benefits and their disability makes it harder to get a job).

If you are in a couple and responsible for a child, you can qualify if you or your partner works at least 16 hours a week – as long as you work at least 24 hours a week in total between the two of you.

In order to qualify for the full amount, your income also needs to fall below the threshold of £6,420.

This figure is usually assessed by looking at your income in the previous year, so you need to report any major changes to HMRC or you may be over- or under-paid.

If you earn more than the threshold, your tax credits will be reduced until the point where you are not entitled to anything.

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How much is Working Tax Credit worth?

Your payment is a combination of a number of elements, of which you may be entitled to all or just some.

There’s the basic element, which anyone entitled to Working Tax Credit will get.

This is worth £1,960.

Then there’s a second adult element, which applies if you are claiming as a couple. This is worth £2,010.

There is a lone parent element for single parents which is also worth £2,010, and an additional 30-hour element if you work longer than that each week (or are claiming as a couple with a child and work at least 30 hours between you) worth £810.

There’s a disability element if you get certain benefits and work at least 16 hours a week (£2,970), and a severe disability element (£1,275).

You may also qualify for the childcare element – covering up to 70% of your childcare costs – up to a maximum limit of £122 a week for one child and £210 a week for two or more children.

The complexity of the system makes it difficult to work out what you can get so you can use the calculator on HMRC’s website.

How do I apply for Working Tax Credit?

If you do qualify for any credits they aren’t handed out automatically, so you’ll need to apply.

Contact the tax credit helpline on 0345 300 3900 and ask for Form TC600.

To complete it, you will need paperwork relating to your job, such as your P60 or P45.

You will also need details of any savings, income, benefits, your childcare provider and your national insurance (NI) number.

Once you start receiving credits, you will get payments up until April 5. This is because the credits are aligned with the tax year, which runs from April 6 to April 5.

The amount you get is set for the year, so it’s vital to tell HMRC if your circumstances change during the year as you may face a significant over-or-under payment. 

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How do I renew Working Tax Credit?

After the end of the tax year, you will either get an annual review notice in the post, or an annual review notice and an annual declaration form.

If you get the annual declaration form, you will need to provide all the information they ask for by July 31 – even if you don’t want to renew your claim.

If you don’t respond, your payments will stop and you may have an overpayment to pay back.

If you only get the annual review notice and nothing has changed, you don’t need to do anything as the claim will automatically renew.

If your circumstances have changed, however, you need to tell HMRC.

Universal Credit replacing Working Tax Credit

The Government has already announced plans to replace tax credits with a single Universal Credit.

However, this has also proved more complicated than the Government expected, so change has taken longer than planned.

However, it is being rolled out to some areas, so depending on your circumstances you may claim this instead.

Your first step, therefore, should be to visit the HMRC website to see if this has been rolled out in your area – and if you qualify.