One of the hottest issues in this era is the pending cuts on tax credits and the significant effects they will have on families in the UK. In order to understand what the cuts really mean, let’s look at tax credits, what they are and who benefits from them. Tax credits are simple mechanisms that ensure the redistribution of income to people who have low wages. The credits are usually classified into 2:
|Child credits - payments to families with kids|
|Working credits - payments to people with low incomes|
What Is the Importance of the Tax Credits?
This mechanism was made with only one purpose; to raise the living standards of people with low incomes. The tax credits aim at lifting families to reduce dependency on welfare as well as give people incentives to go to work. Initially, before the credits were introduced, welfare benefits were withdrawn soon after one got a job, regardless of the wage. Therefore, if the welfare was better, it was preferable to remain jobless. With the credits, low income earners can still get benefits to boost their income.
Who Gets the Tax Credits?
Contrary to popular belief, these credits are not a preserve of the extremely poor. For clarification purposes, the poor are seen as those whose income is below 60% of the median wage. These credits also benefit families with dependent children and those living with disabilities.
Let us break it down to simpler statistics. Any single person, broadly speaking, who earns less than £14,000, is entitled to the credits, so is a couple earning a combined income of less than £19,000. If the children are added to the equation and the earnings are less than £40,000, tax credits come in to save the day. You can go online and use the tax credits calculator to see how much you can get.
Conditions for Tax Credits
There are a few conditions that come with the credit. Some of the common ones include the following;
Universal Credit Eligibility
Anyone receiving these benefits are not eligible for universal credit simultaneously; one has to choose between the two
The Claim Amount
The amount any claimant receives is dependent on a variety of factors, top on that list being age, hours worked, income, number of children as well as marital status and whether applying as a couple or single. The basic annual working credit amount is usually £1,960, and child credits are at a flat rate of £ 545 annually, with an additional maximum of £2,780 per child. The kinship carers are exempt from cap on child tax credits though.
Tax credits are given to anyone above the age of 16 depending on the prevailing circumstances. However, in most cases, anyone who doesn’t have a disability or the responsibilities of a child needs to be 25 to make a claim.
Every claimant must indicate working hours. Those aged 25 to 59 years should be working a minimum of 30 hours a week to qualify for these credits while those aged above 60 are expected to be working not less than 16 hours a week. Disabled individuals and single parents to one or more children should be working a minimum of 16 hours a week. Couples wishing to place a claim and have one or more children should be working a combined minimum of 24 hours a week with one of the parents working at least 16 hours a week.
How to Place a Tax Credit Claim
This is usually a simple process of filling up the credit form for first timers. Make sure to clearly indicate your age, working hours, number of children, childcare costs, disability (if any) as well as your personal details. If you are already receiving the credits, simply call the Tax Credit Helpline to keep your claim updated or for any tax credit general enquiries.
Updating Your Tax Credits
Tax credits are awarded annually. Therefore, if you still need a little assistance, you’ll have to renew the claim annually. Don’t worry if you cannot keep all the dates in your head; the tax credits office usually makes calls to remind claimants to renew their applications.
Circumstances can change in the course of the year; the dependent children may leave, your income may increase, or anything that may change the details that qualified you for the credits. If this happens, it is important to inform the tax credits office immediately.
Additionally, if you are faced with circumstances that may require additional support such as a drop in income or an increase in number of dependants, it is important to let the Tax Credits office know so as to review your claim. You may get the additional support you need.
It is also important to note that you can get child tax credit on top of working credit if you are on a low income and have children. In most cases, you need not apply both separately if you need them. The officers will guide you on the application process.