Tax credits are payments from the government. If you’re responsible for at least one child or young person who normally lives with you, you may qualify for Child Tax Credit. If you work, but earn low wages, you may qualify for Working Tax Credit.
Full information about Tax Credits, including calculators and guide rates, is kept up to date on the Directgov website – but a summary of the key facts is listed below.
How much you’ll get
Tax credits are made up of a number of elements, or payments. When the Tax Credit Office receive your claim form your family circumstances will be looked at to see which of the elements you are eligible for.
The Tax Credit Office will also look at the information you’ve given about your total household income to work out whether you will get tax credits in full – the maximum amount, or at a reduced rate. The higher your income, the less tax credits you are likely to get.
Help with childcare costs
If you work and pay for childcare you may be able to get tax credits to help with the costs. You have to work for at least 16 hours a week to qualify. You may still qualify if you worked 16 hours or more before going on maternity, paternity, adoption or sick leave.
You must use registered or approved childcare which may be provided by:
- a childminder, nursery, play scheme or a club that is registered to provide childcare
- someone approved under the home Childcare Approval Schemes in England, Wales and Northern Ireland who provides childcare in your child’s home or in domestic premises
- a school, out of school hours and on school premises – but special arrangements apply in England and these are explained below
- a care worker or nurse from an agency registered for providing care in the home, for example, a domiciliary care worker
- an approved foster carer, but the care must be for a child who is not the carer’s foster child
You must check your childcare provider is registered or approved.
Repaying overpaid tax credits
If you have been paid too much in tax credits you may have to pay back the extra money. The Tax Credit Office will either reduce your current payments if you’re still getting tax credits, or ask you to make a direct payment – a one off payment for the full amount. Either way help is available if you can’t afford to pay.
Repayment of tax credits is the nightmare in the system that you need to be aware of. Each year’s Tax Credits award is part-retrospective and part-prediction. You tell the HMRC what you earned in the last tax year, and what you think you will earn in the coming tax year.
If you make a claim in the subsequent year that shows you earned more than you predicted, you will have been awarded more last year than you should have been and will be asked to pay some back. It’s crazy for the Government to rely on everyone’s ability to predict the future, and then to force them to find money to make repayments but that’s sadly the way it was set up.