David Barry Accountant

Do you know how they work? If you don't then read on. These benefits are designed for low income families. Don't know what that means? Then please read on.

How much do you get?

The amount of tax credits you get depends on things like:

how many children you have living with you
whether you work - and how many hours you work
if you pay for childcare
if you or any child living with you has a disability
if you're aged 50 plus and are coming off benefits

Your payments also depend on your income. The lower your income, the more tax credit you can get.

Example 1

Mr and Mrs Khan both work full-time. Between them, they earn about £25,000 a year. They have three children. They get about £55 a week in tax credits.

If their income was higher, and they earned about £50,000 a year, they’d get about £10 a week instead.

Example 2

Jon Barry is aged 30, not married and lives alone. He works full-time and earns £10,000 a year. He gets about £12 a week in tax credits.

How tax credits work

If you're married or living with a partner you'll need to make a joint claim for tax credits. You can only make a single claim if you don’t have a partner.

HM Revenue and Customs (HMRC) pay tax credits directly into your bank, building society, Post Office® or National Savings account if it accepts Direct Payment - either weekly or every four weeks.

If you're both working and you both qualify for Working Tax Credit, you can decide who'll get the payments.

If you’re claiming Child Tax Credit and you’re in a couple you need to decide which one of you is the children’s main carer. If you’re the main carer then the money will be paid to you.

Especially if you are or become self-employed because your income changes. Beware!

Revenue and Customs base their payments on your last completed tax return. This means if your income increases and..you do not inform them; Revenue and Customs will continue to pay money into your bank account.

So what, you ask? Well, if completing next year's claim form (these are mandatory and must be completed each tax year) then if you find that your income has increased... Revenue and Customs will ask for immediate repayment of the debt. We know this as we have evidence form several of our clients.

So, how do you avoid this? Simple. Keep a close eye on your self-employed income.

So, if you think this is increasing then immediately phone Tax Credits. Do not wait for the next tax year.

Changing job and getting a big increase? Don't forget to telephone Working Tax Credits helpline and tell them.

By keeping in touch (forget the costs of phoning 0845 etc etc) and keeping Working Tax Credits informed of your ever changing circumstances you can avoid receiving tax overpayments and so subsequently running into debt?

Equally, if you lose your job or change jobs and your wages decline: all is not lost. Simply telephone Tax Credits and tell them and further increased payments will arrive.

For the unititiated a tax year runs from 6 April of one year to the 5 April of the following year. Therefore, the last tax year was from 6 April 2008 to 5 April 2009 and the next tax year runs from 6 April 2009-5 April 2010. Got it!

Blog

How much do you get?

How tax credits work