Working Family Tax Credit

The Basics Of The New Working Families Tax Credit

Before April 2003, the HMRC (or the Her Majesty’s Revenue and Customs) offers a tax credit payment to United Kingdom citizens who are within the low income bracket. Called the Working Families Tax Credit or the WFTC, it credits people using wage packets that are given to individuals monthly through their bank accounts. However, the Working Families Tax Credit was renamed and reworked into what is now called the Working Tax Credit. Operating from April 2003 up until the present, this tax credit system works just like the WTFC, except for some significant changes.

First, let’s look into the rules for eligibility.

As mentioned earlier, the Working Tax Credit is for UK citizens who are low income earners. However, there are specific standards considered before the HMRC qualifies an individual. Specifically, there are four qualifications:

* Anyone responsible for a child is eligible for the Working Tax Credit. You need to be aged 16 and above to claim tax credits and you need to work for at least 16 hours per week. An individual is considered as a child if he or she is not above 19 years of age is a full-time student, at least until the A levels or in approved training courses.

* If you are 25 years old or older and work at least 30 hours a week, you can qualify for a Working Tax Credit.

* Disable people aged 16 and above can get Working Tax Credit. Of course, to qualify, you need to work 16 hours per week (at least). You need to be a low income earner and qualify for disability benefits as well.

* Lastly, people 50 and above who get certain benefits (those for aged and retired individuals, specifically) and still work at least 16 hours per week (and started their work during the previous three months) qualify for a Working Tax Credit.

A qualified individual will have his or her income from the last tax year compared to £6,420. You can get the maximum possible amount for your Working Tax Credit if your income is equal or below £6,420. However, this maximum amount will depend on certain factors. This is where the annual award computation comes.

In a nutshell, the annual award can be derived by getting the difference of Elements and the Withdrawals. Elements are pre-determined according to specific situations. If your situation fits the Element requirement, you can add it to your Element computation. For instance, one of the elements is called the basic element. This is worth £1,860—and everyone is entitled to it. A single parent or a couple is entitled to the second adult element as well, while disabled individuals are entitled to the disability element (£1,860 and £1,075 respectively), among others.

The Withdrawals, meanwhile is computed by deducting your income to your total elements times a withdrawal rate. The withdrawal rate depends on whether your income exceeds the pre-set limit. For example, an individual who earns £9,000 has a withdrawal rate of 39 percent—a figure that remains the same if the person’s income surpassed the £6,420 limit.

Those who are eligible for the Working Tax Credit can still be eligible for the Child Tax Credit, a tax credit that gives consideration to the special condition of people who raise children.

 

 

 

 

 

 

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