Tax credits

Tax credits

Including info on how (and when) to update your details

Tax credits can be worth £1,000s each year, but unlike many other benefits, need to be renewed annually. Your tax credits can also go up or down, or stop altogether, if there are changes in your family or work life. This guide takes you through all the ins and outs, including how and when to renew, and whether to make the switch to universal credit.

Over 8 million households on benefits will get a one-off cash boost It's part of the Government's new cost of living support package. We cover who's eligible, and how much you'll get here

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What are tax credits?

Tax credits, despite the name, are benefit payments to support people with children or who are in work but on low incomes. There are two types of tax credits:

  1. Child tax credit – for people with children, whether working or not. Eligibility depends on how many children you have and the number of hours you work.
  2. Working tax credit – for people who work, but are on low income, irrelevant of whether you've got kids or not.

Yet most can no longer apply for tax credits. If you need support with your income and it's the first time, or it's a new claim after a period when you weren't claiming tax credits, you'll need to apply for universal credit.

However, if you're still receiving tax credits then you can continue to get them until either your personal circumstances change, or you're moved on to universal credit automatically as part of the 'managed migration' – whichever happens first.

And if you get the severe disability premium, or you got it in the past month and remain eligible, you can still make a new child tax credit claim. But you can no longer make a new working tax credits claim.

The amount you can get depends on a number of factors:

  • Your income. The more you earn, the less you're likely to get. However, there's no set income limit as what you get depends on your (and your partner's, if you have one) circumstances.

  • Whether you're single or in a couple. Couples need to make joint claims based on household income.

  • When your children were born. Your children's birth dates determine how much support you can get for them.

  • Your working hours. You need to work at least a minimum number of hours per week to be eligible. Overtime only counts if you work the hours regularly. See detailed working hours rules.

  • Whether you've a disability. More is available for those getting some disability or sickness benefits.

For more on the specific entitlements and exactly how much you can get, see the child tax credit and working tax credit sections.

You might be better off switching to universal credit now...

Universal credit is replacing tax credits and everyone currently receiving tax credits will eventually be migrated on to universal credit, but you can choose to switch to universal credit sooner if you'll be better off doing so. But once you've switched, you can't switch back.

If you're already claiming tax credits, you can continue to do so until you have a change in circumstances and need to make a new claim. If nothing changes, you'll be moved over to universal credit at some point in the future as part of the 'managed migration'. The November 2021 Budget suggested that everyone would be moved over to universal credit by 2025.

You can only make a new claim for working tax credit if you already get child tax credit. In any other circumstance, you will have to apply for universal credit instead.

However, some people will be better off switching to universal credit now, while others should stay on tax credits for as long as possible. See our Switching to universal credit guide.

How much will I get in tax credits?

The amount you get depends on a few different factors. Check both the child tax credit and working tax credit sections here to see what you should be getting...

Child tax credit: in detail

Child tax credit is for those who take care of any children eligible for child benefit (up to 31 August after they turn 16, or up to 20 if they're in full-time education or registered with the careers service). Importantly, you don't need to be working.

It's made up of a series of different and separate elements, and the total you get is the sum of all those different parts.

Child tax credit – maximum per element (the more you earn, the less you get)

CHILD TAX CREDIT ELEMENTS MAX ANNUAL AMOUNT FOR 2022/23
Child element: Per child £2,935
Disabled child element: For each child that receives disability living allowance (DLA), is registered blind or has been registered blind in the last 28 weeks. You'll get this on top of the child element £3,545
Severely disabled child element: For each child who receives the highest rate care component of DLA. You'll get this on top of the child element and disability element £1,430

Is child tax credit affected by how much I earn?

If your household income is £17,005 or below, you'll get the maximum amounts above. If you earn above this, your tax credits award will be reduced by 41p for every £1 you earn above this threshold. As how much you can get depends on your personal circumstances, it's always best to use a benefits calculator to see how much you might be entitled to.

You'll only get the 'child element' for more than two children if they were born before 6 April 2017

If you're still receiving child tax credit, how many children you can claim the per child element for depends on when they were born:

  • If your children were born on or after 6 April 2017, you can only claim tax credits for up to two children. (But you can still claim child benefit for all of them).
  • If your children were born before 6 April 2017, you can claim tax credits for more than two children.

You can now only make a new child tax credit claim if you receive the severe disability premium or you did so in the past month and are still eligible. If this doesn't apply to you, you'll need to apply for universal credit instead. Use our free benefits calculator to see if you'd be better off under the legacy system or universal credit.

Working tax credit: in detail

It's an oft-heard criticism that some people are better off on benefits than working. The aim of working tax credit has been to give an extra boost to those in work on lower pay to stop that happening. The payouts fall into three groups:

  • Working over 16 hours a week: Single parents or those in a couple who are disabled, a carer or over 60. It also applies to the working partner if their other half is ill, in hospital or in prison.

  • Working over 24 hours a week: Couples not claiming for childcare costs need to work at least 24 hours between them (if both are working, one must do a minimum of 16 hours). To claim for childcare costs, both partners need to work at least 16 hours.

  • Working over 30 hours a week: Provided to those who are over the age of 25 and earning within the income criteria.

As with child tax credit, it's made up of a series of different and separate elements, and the total you get is the sum of all those different parts.

Working tax credit – maximum per element (the more you earn, the less you get)

WORKING TAX CREDIT ELEMENTS MAX ANNUAL AMOUNT FOR 2022/23
Basic element: For anyone who works the correct hours (and meets the tax credit criteria above). £2,070
Couples and lone parent element: Either a payment for a second qualifying person in a couple or if you are a single parent. £2,125
30-hour element: An extra payment if you work at least 30 hours a week. (1) £860
Disability element: For working people who are disabled. (2) £3,345
Severe disability element: For each person who receives the highest rate care component of disability living allowance or the higher rate of attendance allowance, you'll get this on top of the disability element. (2) £1,445
Childcare element: Allows you to get back up to 70 per cent of eligible childcare costs to a maximum of £122.50/week (one child) or £210/week (2+ children).  
(1) One payment per couple. (2) One payment per person.

Is working tax credit affected by how much I earn?

If your household income is £6,770 or below, you'll get the maximum amounts above. If you earn above this, your tax credits award will be reduced by 41p for every £1 you earn.

How much you'll get will depend on your personal circumstances, so again, it's best to use a benefits calculator to see how much you could get.

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You need to renew tax credits every year

If you get tax credits, you should receive an annual renewal pack, which are usually sent out between April and June. Some just need checking, others require signing and sending back before the deadline (usually 31 July).

If you don't receive your renewal pack by the end of June, it's recommended you call the tax credits helpline on 0345 300 3900 or speak with HM Revenue & Customs via its webchat service (you should be able to renew directly when getting in touch).

Don't ignore renewal notices – it could mean your payments stop completely and you're asked to repay all the money paid since the April of that year. Had a change in your circumstances since you last renewed? The most important thing we can yell to you if your circumstances are different is...

TELL 'EM, TELL 'EM, TELL 'EM!

It's vitally important that you check your details are still correct when you receive your renewal pack. Though you should also tell HMRC about changes that happen throughout the year.

Watch out for SCAM tax credit messages

Be alert to fraudulent texts and emails purporting to be from HM Revenue & Customs (HMRC), which are actually from scammers. These messages can look legitimate – so be on your toes. Remember: HMRC will never ask you to provide your personal or financial information. For more info:

Got your renewal notice? Check the figures – even if you DON'T want to claim anymore

The renewal pack isn't just estimating your credits for the current year, it's checking whether you were correctly paid for the last year. So failing to sort it out could leave you suffering overpayment or underpayment problems.

The packs look at how much you earned in the previous tax year (April to April) – this is then used to:

  • Check you received the correct payment last year as the payment you received was only based on an estimate using the amount you earned the previous tax year. If you've been overpaid, you'll end up having to repay. 
  • Calculate the amount you'll get in the current tax year (again this will be an estimate as you could then end up earning more or less).

Some people (usually those with higher claims) may also receive a letter asking for more information on their claim. This is not a scam, though if you are contacted, it'll only be by letter, not email or phone.

Check if you got a "red line letter" or a "black line letter"

Everyone gets an annual review notice. But some will get an extra annual declaration form too. This is the difference...

The review notice – black line on the letter (most people will get this letter)

TaxCreditsformblack

ONLY respond to make changes

What is it? This is simply a statement for you to look through and indicate if anything has changed. The letter will have a BLACK line underneath your address and reference number on the first page. 

What to check? Check all the information is correct, especially income. If it is, you DON'T NEED TO DO ANYTHING – your credits will be automatically renewed.

BUT if any information is wrong, you must let the tax credit office know before the deadline.

Important: For those who are self-employed, if you received one of the self-employed coronavirus support grants, you will need to report this.

The declaration form – red line on letter

TaxCreditsformred

You MUST return it or renew online (or by phone) if you get one

What is it? The declaration form has a few assessment questions on it. The letter will have a RED line underneath your address and reference number on the first page. If you've been sent one, you MUST complete it and return it to the tax credit office or renew online/by phone before the deadline, or your tax credits will STOP.

What to check? You need to check whether the details on your review form are correct.

What to do? You need to renew your tax credits by the deadline, normally 31 July. See the section directly below for the different ways to renew your claim.

Ways to renew your claim

You can renew your claim in several different ways. Here's how to do it, including exact details of when you'll need to renew by (this varies depending on your method of renewal):

  • Renew online. You can renew your tax credits, tell the tax credit office about any changes and find out how much and when you'll be paid by using HMRC's online tax credits service. Alternatively, you can also use HMRC's free mobile app, available for iOS and Android.
     
  • Renew by post. Do this by filling in and signing the renewal form and then posting it. If you do post the form, HM Revenue & Customs (HMRC) will need to have received it by the deadline (normally 31 July) – meaning you'll have needed to post it in advance of the deadline.

  • Renew by phone. If you'd rather speak to someone, you can use the telephone helpline, but beware – it usually gets very busy leading up to the deadline, so the sooner you renew, the better. HMRC says the least busy time to call the tax credit helpline on 0345 300 3900 is mid-afternoon.

What if I miss the deadline to renew my tax credits claim?

If you have changes and miss the deadline, you risk overpayments or underpayments.

Underpayment means you won't get what you're due, and even if you do try to claim later, you can only backdate for one month, so may miss out.

Overpayment means giving you too much and, while this may sound good, the tax credit office will ask for the cash back even if you've spent it. This is one of the single biggest tax credit nightmares and you need to be careful.

WARNING: If you deliberately mislead over tax credits, you can be fined or even prosecuted. HMRC can charge you a penalty of up to £3,000 if you deliberately or negligently give the wrong information on your claim, when telling HMRC about a change of circumstances or when providing information as part of its checks.

HMRC can also charge you a penalty of up to £300 if you fail to give information or tell it about certain changes of circumstance within one month of them happening.

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Tell HM Revenue & Customs if your circumstances change

It's crucial that if anything changes which affects tax credits, you tell the tax credit office as soon as possible otherwise you may find you owe them money – at the very latest you should inform the tax office when you get your annual renewal pack.

Sometimes the tax credit office may contact you to check if your circumstances have changed. This is perfectly normal.

This happens because payments are ESTIMATED from last year's earnings, but cover this year's working hours. So if things change – maybe your income has changed because of coronavirus – and you don't tell them, you'll be underpaid or overpaid.

Changes you MUST tell the tax office about

There are some circumstances where you need to tell the tax credit office within one month of the change taking place. If you don't let it know, you may be fined up to £300. Some changes will mean your tax credits automatically stop and to continue to get financial help, you'll need to start a fresh application for universal credit. 

  • Change of status. If you move in with a partner, get married, separate or leave the UK for longer than eight weeks. It is vital to know that a change in status will immediately STOP your existing tax credits. To get the financial help you're entitled to you'll need to move onto universal credit. See Universal credit, will I be worse off? for all the ins and outs.
  • Change in working hours. If you start or stop working or change your number of hours (especially if they drop below your threshold). Your tax credits won't necessarily stop, but depending on the level of change, you could be better off on universal credit. See Universal credit, will I be worse off?

    Update: 
    During the coronavirus pandemic, many people were furloughed or placed on reduced hours. In these cases, HM Revenue & Customs (HMRC) assumed a person's normal working hours continued, meaning what they received in tax credits stayed the same. However, if you receive working tax credits but are still working fewer hours than normal, you must inform HMRC of this by the end of December.
  • Changes for children. If you have a child, your childcare costs go up or down, your child leaves home or you start getting childcare vouchers. A change due to a child will not automatically stop your tax credit claim.
  • If you also get housing benefit and you move to a new council area. If you're getting tax credits alongside housing benefit and you move to a new council area, to continue to get help with housing costs, you'll need to start a new universal credit claim. This then would mean that your tax credit entitlement would stop. See Universal credit, will I be worse off?

Changes you SHOULD tell the tax office about

There are some circumstances where you have longer to tell the tax office, sometimes until renewal. Yet don't wait, as it could also lead to overpayment problems, which means you're earning more money than you should and at the end of the year it'll ask for the cash back. Not good if you've already spent it!

  • Income changes. You change your job or your income goes up or down.
  • Children's education. Parents with children staying on at school to take A-levels, starting further education, or taking approved training courses must tell HMRC what they're doing or risk losing out on child tax credits (and child benefit too). This is because when a 16-year-old finishes their GCSEs, the tax office assumes they have left education to join the world of work.

    This triggers an end to child benefit and child tax credit payments for them unless the parents get in touch to confirm their children remain in education.

    They must also inform the tax office if their child starts a college course in September, but later decides that it's not for them and leaves. This avoids the need to repay overpaid benefits at a later date.
  • Address changes. You move home, bank account or have a new phone number.

    When notifying the tax credit office, keep notes. It's not unheard of for it to say you didn't get in touch when you say you did, so put together a file for tax credit paperwork and write down details of every communication you have. Include who you spoke to and when you called.

Also have a look at the Government's detailed list of changes you need to report to the tax credit office.

Got a Post Office card account?

Post Office card accounts closed on 5 April 2022, so if that's where you received your tax credits, you'll need to contact HM Revenue & Customs and let it know details of a new account as soon as possible. For more info, see Got a Post Office card account? above.

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What to do if you've been overpaid tax credits

Overpayments are where you've received too much money in the past that you don't qualify for. It might sound good, but the problem comes when the tax credits department asks for its money back and you've already spent it.

Too many overpayments meant tax credits' reputation suffered in the early years. The situation has improved with time, but it isn't perfect now and many still do not trust the system.

Overpayments usually happen because...

  • You didn't tell the tax credit office about changes. You normally have one month to tell the tax credit office of any key changes in your circumstances, though discretion is given if you or a family member were seriously ill.

    If you don't let the office know of any changes within one month, you could be asked to pay back any overpayments, so do it as quickly as possible to avoid potential issues.
  • The tax credit office didn't meet its responsibilities. It either made a mistake in your calculations or took longer than a month to update your records once you told it about any changes.

Do I have to repay overpayments?

If it's your fault, you do have to repay. But if the tax credit office is at fault and you told it of any changes in good time, you won't have to repay.

Of course there may be a problem with evidence, and that can get tricky. As a general rule, if you did it right and the tax credit office failed to carry out its responsibilities, the excess cash you were paid specifically because of that error is yours. The tax office has also been told it can't take legal action for overpayments if you've not made any mistakes.

Don't know why you got a overpayment letter?

If you don't know why you were overpaid, in the first instance call the tax credits helpline on 0345 300 3900 and ask for an explanation, but follow up any issues in writing. If there isn't a proper reason, you can challenge the overpayment decision. If nothing has changed, then there's no reason for you to have been overpaid. By challenging it, your situation should be looked at again.

In your letter, explain that you don't know why it's an overpayment as nothing's changed, and as you'd provided all the correct info, you don't think you have been overpaid.

What if you think the tax office has made a mistake and you haven't actually been overpaid?

If you think the tax credit office has made a mistake in its calculations, you can start a dispute or appeal against having to repay. Your overpayment will then be placed on hold while your case is investigated (a 'normal' complaint will not hold up the overpayment).

  • Disputes. Where you gave it the right info but it didn't act on it. If you disagree that you should pay back an overpayment – for example, you told it you had a decrease in childcare costs – but it continued to pay you the higher amount anyway, fill in form TC846 or send a letter.

    You must send your dispute form within three months of either the date on the first letter, statement or notice you received telling you that you've been overpaid or the 'decision date' on your annual review notice (although exceptions to this time limit are made in some circumstances).

  • Appeals. Where it's asking for money back it shouldn't be. If you disagree with the amount of tax credit you've been given, you can put in an appeal using the WTC/AP form, which is also know as asking for a 'mandatory reconsideration'. You must fill in the appeal form within a month of being told about the overpayments, so act quickly.

    An example of an appeal is when you've been correctly paid tax credits for three children, but it's wrongly saying it's an overpayment as you've only got two who are eligible.

    If you disagree with the outcome of the mandatory reconsideration, then you can appeal to the Social Security and Child Support Tribunal in England, Scotland or Wales or the Appeals Service Northern Ireland.

If you disagree entirely with a tax credits decision and you think the amount you've been awarded is wrong, then it's best to first call the tax credit office on 0345 300 3900 as it may be a simple case of human error.

However, whether it's an appeal or a dispute, give all the information you can. Include any evidence and why you don't think you should repay.

If that's not successful, you can still make a complaint and go to the adjudicator or even the Parliamentary Ombudsman.

How you repay overpaid tax credits 

How you repay will depend on your circumstances when you come to make the repayment:

  • If you're still getting tax credits. It's likely your future payments will be reduced so the tax credit office can recoup the cash you've already had. This is usually 10-25% of your weekly payment (but could be more for higher earners).

  • If your payments have stopped. If your payments have stopped, whether because you no longer qualify or didn't renew in time, you'll normally get a letter asking you to repay the entire amount within 30 days. A separated couple will usually be asked to pay back half of the money each.

    If this happens and you can't afford it, simply contact the tax credit office and politely explain this to them. It will usually be possible to spread the repayments over a year. In extreme circumstances you may get even longer, or if the tax office believes you'll never be able to repay, have the entire amount wiped.

  • If you're getting universal credit. If you were previously claiming tax credits and are now claiming universal credit, HM Revenue & Customs will tell you how much you owe. Your universal credit payments will be reduced until you've paid back the money you owe.

Get help on overpayments

You can download the Low Incomes Tax Reform Group's detailed PDF guide (591kB) to overpayments and how to cope with them. And there's also more help...

Help from other MoneySavers:

Go to the Benefits & Tax Credits MSE Forum board.

Specialist detailed guidance:

Go to the Low Incomes Tax Reform Group.

Tax credit forum:

For more info, go to Tax Credit Casualties.

One-on-one help:

Citizens Advice Bureau and local law advice centres often have advisers who will be able to help you appeal or dispute unfair overpayments.

I think I've been underpaid what can I do?

This is an easier scenario than overpayment. Usually your correct payment will be calculated as soon as you send back your renewal forms, or after 31 July if you don't need to send in your review form.

If you think you've been underpaid at any other time, do a full check on the HM Revenue & Customs calculator and contact the tax credit office helpline on 0345 300 3900 to let it know.

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Would I be better off claiming universal credit?

Universal credit is a monthly benefit that's replacing six means-tested benefits, including child tax credit and working tax credit. It's designed for people both in and out of work.

The scheme has now been rolled out to ALL eligible households in the UK, meaning you can't now make a new claim for working tax credit – you'll have to apply for universal credit instead and HM Revenue & Customs will inform you when you're required to do so.

Everyone currently receiving tax credits will eventually be migrated on to universal credit (expected to be by 2025 or sooner if your circumstances change), but you can choose to switch to universal credit sooner if you'll be better off doing so.

Some people will be better off switching to universal credit now, while others should stay on tax credits for as long as possible. But remember that once you've switched over, you can't switch back, so make sure you understand what you'll be getting under the new universal credit scheme. See our guide on switching to universal credit.

Tax credits FAQs

  • What counts as income for tax credit purposes?

    This is any money earned from paid work (overtime only counts if you work the hours regularly), self-employed profits or some benefits (such as contribution-based jobseeker's allowance or employment and support allowance, incapacity benefit – in some cases – or carer's allowance, but not child, housing, council tax or disability benefits).

    It also includes any extra income above £300 you (or a partner) receive from a pension, savings, renting out a property, or things such as a trust or interest in the estate of a person who has died.

    Also included is any income you received from the Coronavirus Job Retention Scheme (for instance, if you've been furloughed).

    You don't need to include money paid for child maintenance or your children's income, and some maternity benefits are partly excluded – however, you could lose out on an average £495 if you don't deduct the right amount of maternity pay from your gross income.

    For the self-employed, income is any profit made in the last tax year, as submitted on your tax return. If you haven't finished your tax return yet, make a best guess based on your profit so far. If your business is new and you've had no income from it in the last year, you can leave the income section empty.

    If you've received one of the self-employed income support scheme grants because your business was impacted by coronavirus, you need to include details of this in your tax return / estimated profit.

  • When will I get the payments?

    You should start to get payments within a few weeks, and you'll be paid weekly or every four weeks straight into your bank account. If you start to work too few hours your payments will continue for four weeks, otherwise you'll no longer get the credit if your eligibility stops.

  • What counts as a couple?

    If you're married or living with someone, then you must put in a joint, rather than single, application. You can only put in a single claim if you don't have a partner. If you're in a permanently separated couple, then you're counted as a single parent and any payment is made to the child's main carer.

  • Who will the payments go to in a couple?

    You only get one payment per couple. For child tax credit or the childcare element of working tax credit, payments are made to the parent who mostly looks after the child. Working tax credit payments will go to either partner, so you need to decide which account the money is paid into.

  • Can I claim for childcare costs?

    If you're paying for childcare, it's important to include these costs in your tax credit claim, as the money available is huge, and it's possible 100,000s of families are missing out.

    The average weekly payout is around £60 – that's over £3,000 a year!

    See the special Childcare tax credits guide for more info on what counts as childcare (from babies in swaddling clothes to stubbly six-foot 15-year-olds).

  • Why have my tax credits stopped?

    Your tax credits can stop if there are changes to your family or work life. If you're unsure why your payments have stopped, it's best to contact the tax credits helpline directly on 0345 300 3900.

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