Important Changes to Tax credits from April 2012
The income limit for Child Tax Credit is going down
Child Tax Credit payments depend on your circumstances and income. At the moment, you can usually get some Child Tax Credit, as long as your income is not over the limit of £41,300.
From 6 April 2012, this limit will be lower for most people and the income limit for you will depend on your own situation. As a very rough guide, you might not be able to get Child Tax Credit from 6 April 2012 if:
- you have one child, and your annual income is more than approximately £26,000
- you have two children, and your annual income is more than approximately £32,200
But it’s important to know that:
- this is a rough guide
- the income limit for you may be different, as it depends on your own circumstances
You could still qualify from 6 April 2012 if your income is above these amounts. For example, if you pay for registered or approved childcare, are disabled, or have more than one or two children.
You can find out how your own payments may be affected by checking your award notice for 6 April 2011 to 5 April 2012.
Couples with children – new working hours rule for Working Tax Credit
At the moment, if you’re responsible for at least one child and work at least 16 hours a week, you can get Working Tax Credit. From 6 April 2012, the rules for couples with at least one child are changing. In most cases, to qualify for Working Tax Credit your joint working hours will need to be at least 24 a week.
This will mean:
- if you both work your joint weekly hours must be at least 24, with one of you working at least 16 hours a week
- if only one of you works, that person must be working at least 24 hours a week
If neither of these apply, your Working Tax Credit will stop from 6 April 2012. But there are some exceptions to the new rules – see the section listed below, or you can increase the hours you work, so you would still be entitled to Working Tax Credit.
1. If one of you is aged 60 or over
You’ll still qualify for Working Tax Credit as long as the person who’s 60 or over works at least 16 hours a week.
2. If one of you gets extra Working Tax Credit because of a disability
You’ll still qualify for Working Tax Credit if both of the following apply to the disabled person:
- they work at least 16 hours a week
- they qualify for the ‘disability element’ of Working Tax Credit
3. If one of you is ill, an inpatient in hospital or in prison
You’ll still qualify for Working Tax Credit if one of you works 16 hours or more, and the other is:
- getting certain benefits due to ill health – for example, contribution-based Employment and Support Allowance, or Disability Living Allowance
- an inpatient in hospital
- in prison – serving a custodial sentence, or remanded in custody awaiting trial or sentence
If your income goes down it may not change what you are entitled to straight away
If your annual income for the current tax year is lower than last year, you may get extra tax credits for the current year. A tax year runs from 6 April one year to 5 April the next.
The lower your income, the more tax credits you can get. But from 6 April 2012, when your income goes down it might not affect your payments until the following year.
You should always tell the Tax Credit Office your new lower income, to help make sure you get what you’re entitled to.
If your income goes down in the current tax year by £2,500 or less
- Your payments won’t change for the current tax year – if all your other circumstances stay the same. But the Tax Credit Office will use your new income figure to work out what to pay you for the following tax year.
If your income goes down in the current tax year by more than £2,500
- The Tax Credit Office will re-work your tax credits. But they will ignore the first £2,500 of the reduction. They will take the full amount of the reduction into account when they work out what to pay you for the following tax year.
Changes to how far payments can be backdated
Making a new claim for tax credits
At the moment, the Tax Credit Office can pay tax credits for up to three months before the date they get your claim form. This is known as ‘backdating’ your claim.
From 6 April 2012, this period reduces to one month. If the Tax Credit Office receives your claim on or after 6 April 2012, they’ll only be able to backdate it up to one month.
This change means you could lose money if you delay claiming. For example if you have a baby on 1 June, but your claim’s not received until 1 August, your payments will only start from 1 July. You’ll lose out on a month’s payment.
At the moment, if a change means your payments go up, you’ll usually get the higher amount backdated for up to three months.
From 6 April 2012, this period reduces to one month. If you report a change that means your payments go up, the higher amount will only be backdated by up to one month.
To make sure you get your higher payments backdated to the earliest possible date, you should report all changes within one month.
If you’re getting the extra amount of Working Tax Credit, called the ’50-plus element’, this stops from 6 April 2012. This means your payments could go down from 6 April 2012. This change also means your Working Tax Credit could stop altogether, unless you’re working a certain number of hours. This is explained in the next section.
If you’re aged 50 or over there are working hour changes
If you’re getting the extra ’50-plus element’, you only need to work at least 16 hours a week to qualify for Working Tax Credit. When the 50-plus element stops from 6 April 2012, if you’re not working a certain number of hours your payments may stop altogether. You can increase the hours you work, so you would still be entitled to Working Tax Credit.
From 6 April 2012, you’ll need to be working the following hours to qualify for Working Tax Credit.
If you are not responsible for at least one child
You or your partner, if you’ve got one, will need to work at least:
- 30 hours a week
- 16 hours a week – if you’re aged 60 or over, or you’re entitled to the ‘disability element’ of Working Tax Credit
If you’re responsible for at least one child
You’ll still qualify for Working Tax Credit if either of the following applies:
- you’re single and working at least 16 hours a week
- you’re in a couple, and meet the new hours rules for couples – see the section above
For more information visit the HM Revenue and Customs website – http://www.hmrc.gov.uk/taxcredits/index.htm
or call the Tax Credit helpline on 0345 300 3900 (open 8am to 8pm Monday to Friday and 8am to 4pm on Saturdays).
When you contact the Tax Credit Helpline please have your National Insurance number to hand.