Working Tax Credit is a payment provided by HMRC to low-paid individuals who live in a low-income household, whether or not they have children.

The Working Tax Credit may potentially cover childcare costs. Payments are based on your income, so the more you make, the less you receive. Let’s take a look at the Working Tax Credit in detail.

What is working tax credit exactly?

What is Working Tax Credit Exactly

Working Tax Credits are intended to provide additional financial help to low-income people. The tax credit is also meant to help disabled people and families with children. A Working Tax Credit is available if any of the following conditions are met:

They are 16 to 24 years old and have a child, 25 or older and have a qualifying impairment, with or without children.

To be eligible for a working tax credit, people must work a certain number of hours per week, get paid for their efforts, and earn less than a particular sum.

Individuals and couples that meet the criteria on who is eligible for a working tax credit. The annual cost of the essential element is £1,960. Furthermore, depending on the circumstances, an additional quantity called elements is accessible. The table below may assist you in understanding the potential working tax credit.

The required amount is put directly into the bank or building society account every week or four weeks. The payment is usually made from the time the claim is filed until the end of the tax year (April 5). One of the two accounts must choose from a pair.

The following activities are considered “work” to compute the working tax credit

  • Working as a subcontractor for someone else
  • Working for oneself, often known as self-employment, combines the two options above.

Calculator for tax credit in use

Calculator for Tax Credits in Use

The fiscal year runs from April 6 through April 5 of the following year. The following details are required,

Income partner’s working hours, any benefits previously claimed (or claiming) or that have been terminated, the average amount spent on daycare per week.

The calculator will ask you to enter your prior year’s earnings in most cases. If the income is expected to vary by more than £2,500 in the current tax year, an estimate must supply by subtracting £2,500 from the payment or adding £2,500 if the income grows.

This new total must be used to compute the credit. Because the Tax Credit Office overlooks the first £2,500 of income change, but the calculator does not, this is the case. Put £22,500 into the calculator if your income was £30,000 in the previous tax year and you estimate it to be £20,000 in the current tax year.

Assistance with childcare costs and tax credit

If the individual(s) works 16 hours per week and pays for daycare, they may be eligible to claim the ‘childcare share’ of the working tax credit, which may help with up to 70% of the childcare costs.

  • To qualify, a pair must work 16 hours each week.
  • You may be eligible whether you are employed or self-employed.
  • In most cases, childcare registration or authorization is necessary. It may be seen at playgroups, childminders, and nurseries.

How do I apply for a tax credit?

How to Apply for Tax Credits

The Tax Credits Office accepts online and phone claims. The individual(s) will notify of the measures necessary to continue the tax credits office’s tax credits. The tax credit office must be informed if certain conditions (income change, child leaving home, or single partner/couple moving out) change during the year by dialling 0345-300-3900.

Changes in conditions might affect the amount of money received. If income diminishes, for example, more aid will require. Alternatively, the overpayment must be reimbursed if the income increases.

Income and tax credits have changed

As of April 2016, the threshold for notifying the tax credit office of a significant change in income was lower, from £5,000 to £2,500. If a person’s income increases by £2,500 or more and the tax credit office are not informed promptly, or if the individual waits until the claim is scheduled for re-assessment, they may have overpaid tax credits.

They will be asked to reimburse the monies in excess, either by reducing future tax credits or making direct payments if the tax advantages are no longer available. It’s known as income exclusion.

You must tell the tax credit office within 30 days after obtaining the additional monies to avoid this. If a person’s income drops by £2,500 or more, they may be eligible for further tax credits.

Is it possible to have it?

You may apply for Working Tax Credit if you are presently receiving Working Tax Credit or Child Tax Credit. Universal Credit has replaced it for those who do not have a current tax credit claim.

  • If you already get tax credits, the number of hours you need to work to qualify for WTC is dependent on which of the following groups you fall into:
  • Lone parents who work 16 hours or more each week are in Group 1.
  • Couples with dependent children in which: a. one member works 24 hours or more per week or b. both members work a total of 24 hours or more per week, as long as one works 16 hours or more per week, or c. one member works 16 hours or more per week, and the other is ‘incapable’ (for more information, see HMRC’s advice on the definition of incapacitated), or d. one member works 16 hours or more per week, and the other is in jail.
  • Singles or couples in group 3 are 60 or older and work 16 hours or more each week.
  • Singles or couples without children who have one or both jobs but at least one of them is 25 years old and works 30 hours or more each week.


Working Tax Credit is a stipend paid to low-wage workers. Working Tax Credit is a stipend granted to low-wage workers to augment their income like pension credits for senior citizens. Whether you work for someone else or are self-employed makes no difference. The Working Tax Credit is considered income to establish eligibility for most other means-tested benefits, such as housing.

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