What Are Tax Credits?
Tax credits are designed to help people on lower wages make ends meet. They are also intended to help families liberate themselves from welfare dependency, and to encourage people to work by withholding incentives until they find a job. To qualify for working tax credits, for instance, you need a job where you renderwork for 16 hours a week.
Two types of tax credits
- Children tax credits are paid to qualified families with children.
- Working tax credits are paid to people earning a low income.
A household can receive one or both types of tax credits, depending on their specific circumstances.
Who gets Tax Credits?
It’s a common misconception that only the poorest relies on tax credits. According to the Office for National Statistics (ONS), 40% of working families with children rely on this credit scheme.
Other qualified individuals on tax credits
- Singles earning less than £14,000
- A couple with a combined earnings of less than £19,000
- Families with children earning less than £40,000, provided that
they meet tax credits entitlement specifications
How much tax credit claimants receive
- Child tax credits are made up of a yearly flat payment of £545, and up to £2,780 per child.
- Working tax credits’ basic amount is at £1,960 per year.
As of March 2014, 4 million families with children are on tax credits, and 2.5 million singles or families classed as singles, costing the government £29.7bn in 2013-14. This covers 13.5% of the £220bn welfare budget of the UK.
It is important to note that beneficiaries of tax credits are not eligible for universal credit.
Think you may be due a tax refund? Apply here to get your tax back.