What is Working Tax Credit?​

The government’s gradual roll-out of the Universal Credit scheme is designed to draw together a range of existing benefits into a single payment. Eventually, it’s supposed to take over entirely from things like Working Tax Credits and Child Tax Credits.

The thing is, there are still plenty of people who haven’t yet been moved onto the new system. That’s causing some confusion about what kinds of Tax Credits people can get and how they get them. Here’s what you need to know:

What is Working Tax Credit?

Working Tax Credit is an older benefit system for people on lower incomes. It’s intended to help support people who are in work, whether they’re self-employed or working for someone else.

Working Tax Credit is means-tested, so not everyone will qualify for it. The payments aren’t taxed, but they do count as part of your overall income when you’re applying for other kinds of benefits.

What is Child Tax Credit?

Child Tax Credit is the government’s old system for supporting people looking after children. If you qualify for Child Tax Credit, you can get payments every 4 weeks to help cover the costs of bringing up your kids.

Am I entitled to Working Tax Credits?

The first thing to understand about Working Tax Credits and Child Tax Credits is that most people will no longer qualify for them. For new claims, you’ll probably get moved onto the Universal Credit system instead. If you’re claiming Universal Credit at all, you won’t be able to claim either Working Tax Credit or Child Tax credit.

However, the Universal Credit system is still being rolled out, so there are exceptions to the rule. The most important one is that, if you’re already claiming Working Tax Credit, you could still be eligible for Child Tax Credit. It works the other way round, too. If you’re already claiming Child Tax Credit, you could also have a claim for Working Tax Credit.

To qualify for Working Tax Credit, you need to be working a set number of hours per week. That number depends on your age and other circumstances:

There are a few wrinkles in the rules if you have children or a partner who’s incapacitated, so check the government’s official guidelines if you’re not sure where you stand.

As for Child Tax Credit, if you’re making a new claim, you’ll be able to claim for up to 2 children born after the 6th of April 2017. If they were born earlier, you can claim for all of your kids instead. In both cases, your claim can only cover children that you’re actually taking care of yourself.

How to claim Working Tax Credits

Assuming you qualify for either Working Tax Credit or Child Tax Credit, you can claim and manage your Tax Credits by:

• Working Tax Credit: updating your existing Child Tax Credit claim to include Working Tax Credit.
• Child Tax Credit: updating your existing Working Tax Credit claim to include Child Tax Credit.

How much is Working Tax Credit?

Working Tax Credit isn’t a single, fixed amount for everyone. Instead, what you’ll get depends on a few factors or “elements”. Your personal situation will determine which elements you qualify for. The basic payment for Working Tax Credit is up to £2,500 per year. The extra elements look like this:

For Child Tax Credits, again, your situation determines how much you can claim. If your kids were born before the 6^th of April 2017, they should all qualify for the “child element” of the payment. For kids born later, only your first and second child will qualify for that element:

I already claim Universal Credit. Can I still get Working Tax Credit or Child Tax Credit?

Universal Credit replaces a range of other benefit types, including:

• Child Tax Credit
• Housing Benefit
• Income Support
• Income-based Jobseeker’s Allowance (JSA)
• Income-related Employment and Support Allowance (ESA)
• Working Tax Credit

If you or your partner claims Universal Credit, you won’t qualify for any of the other benefits on that list.

Working Tax Credits and Second Jobs

Having a second job can make a big difference to your tax situation, particularly if you’re claiming Working Tax Credit.

When you’re getting Working Tax Credit, your eligibility is based on the total number of hours you work. Depending on your age and other circumstances, you might need to work 16, 24 or 30 hours a week to qualify. Those hours don’t all need to come from the same job, though. You should add all of your jobs together to figure out how many hours you’re working.

There’s another side of this coin to consider, of course. The amount you get in Working Tax Credit is partly dependent on the number of hours you work. Once your income across all your jobs goes over £6,565 (using the figures for 2021/22), you’ll start to see a reduction in the maximum amount you can claim. Basically, your maximum amount goes down by 41p for every £1 you earn over the threshold. Read more about Tax and your Second Job here.