What are Tax Credits?
Tax credits are state benefits that provide extra money to people responsible for either children, disabled workers and other workers on lower incomes.
Tax credits can fall under one of two categories, Child Tax Credits or Working Tax Credits. Whilst they fall under separate categories, depending on your circumstances you may be entitled to both.
Tax credits are tax-free and you are not required to be paying National Insurance or Tax to qualify, Tax Credits are however means-tested, and will be tested against your household income and current circumstances.
How much Tax Credit will you get?
The amount you are entitled to is initially based on your current circumstances and your income the previous year.
Anyone applying now for the first time would use their current family circumstance and the income they received in between 6th April 2011 and 5th April 2012.
It is important to note that if your income has fallen since last year, you can ask HMRC to revise your award based on your estimated annual income.
You must however be careful not to overestimate the fall in your income otherwise you may be overpaid tax credits which you’ll have to pay back at the end of the year.
Below are three examples of who may or may not be entitled to receive Tax Credits,
If you have children:
If you have children under the age of one and your household income is less than £66,000 per annum then you may be eligible for Tax Credits, if your children are over the age of one then your household income must be less than £58,000 per annum.
If you don’t have children:
If you’re single and your income is around £13,000 or less, then you may be entitled to some Tax Credits, if you’re part of a couple and your income is around £18,000 or less and you work at least 30 hours per week then you might also be entitled.
If you are a disabled worker or are over 50:
If you’re returning to work after claiming benefits you might still qualify for working tax credits.
If you want to discover how we can help your business, Quest Birmingham Accountants offers the following services: Tax Services, Self-Assessment, VAT, Payroll, New Business, R&D Tax Credits, Annual and Management Accounts, Tax Returns, Self-Employed Accounts, Business Planning, Business Tax, Accounts Services, Bookkeeping, Pensions, and UK Tax Deadlines.