The information in this article is only relevant if you have an existing tax credits claim (for Child Tax Credit or Working Tax Credit, or both). If you make a new claim for Tax Credits you will be told to claim Universal Credit instead. However, you can vary an existing tax credit claim, for example, add Working Tax Credit to a Child Tax Credit claim.
Coronavirus and Working Tax Credit For the time being (whilst the Job Retention Scheme is in place – currently scheduled until 30 September 2021) you do not have to report temporary reductions in hours caused by coronavirus if you are on tax credits, as long as you are still employed or self-employed. However, you should continue to report other changes as usual, including if your job finishes or your childcare costs stop, increase or decrease. There is more information from the Low Incomes Tax Reform Group.
Working Tax Credit (WTC) provides extra help if you work and you are on a low income. It is administered by HMRC. You claim WTC with Child Tax Credit (CTC) if you are eligible for both (it is one claim). To get WTC, you need to be working either 16, 24 or 30 hours a week. You must work at least 16 hours a week if you are:
- A lone parent responsible for a child or young person.
- A couple with children and your partner receives certain benefits or national insurance credits for sickness or disability for example, Employment and Support Allowance, Disability Living Allowance or Personal Independence Payment
- A couple with children and your partner is entitled to Carer’s Allowance
- A couple with children and your partner is in hospital or in prison
- Someone with a disability which puts them at a disadvantage in getting a job
- Aged 60 or over.
If you are part of a couple with children and your partner is not sick or disabled or entitled to Carer’s Allowance, you will need to work 24 hours a week between you (unless your partner is in hospital or in prison). One of you must work at least 16 hours a week. The other eight hours can be worked by either you or your partner, or be shared between you. If you are 25 or over and work more than 30 hours a week, you may also be eligible even if you do not have children and are not disabled. Whether or not you receive any WTC will also depend on your income. You use a benefits calculator on the gov.uk website to work out if you are eligible (but remember you can only get WTC if you are already claiming tax credits, see above). Low Incomes Tax Reform Group have more information on how tax credits are worked out.
Treated as working for Working Tax Credit
There are several circumstances when you will be treated as being “in work” even though you are not actually working. Although you may be absent from work, you will be treated as being in work if you were working immediately beforehand and you are:
- In the first 39 weeks of Maternity Leave or Adoption Leave
- On Paternity Leave
- On Shared Parental Leave during a period when Statutory Shared Parental Pay is paid, or would be paid if the conditions were met
- Being paid Statutory Maternity Pay, Statutory Adoption Pay, Statutory Paternity Pay, Statutory Shared Parental Pay, Statutory Parental Bereavement Pay or Maternity Allowance
- Being paid Statutory Sick Pay
- Being paid Employment and Support Allowance, or receiving National Insurance Credits due to being incapable of work or having limited capability for work, for up to 28 weeks after being in work.
- On strike for up to ten consecutive days
- Suspended from work while complaints against you are being investigated
- Not working but were in work within the past seven days, for example, because you are on jury service or because you have a short break between jobs
- Not working 16/24/30 hours a week but stopped, or your hours reduced below these levels, within the last four weeks
In all these cases, you will be treated as working the same number of hours as you were immediately before you stopped work or reduced your hours. It’s important to tell HMRC if you get any statutory payments or maternity allowance in relation to time off work as a parent. That is because not all of this money will be taken into account for tax credits.
Remember that currently the rules are different and if your hours have been affected by coronavirus, you will be treated as working your normal hours as long as you are still employed/self-employed for as long as the Job Retention Scheme is in place (currently scheduled until 30 September 2021).
Working out your hours for Working Tax Credit
If you do a predictable pattern of working such as two weeks on, two weeks off, then you can report your average hours in your tax credits claim. If you have a pattern of term-time working only, tax credits can ignore the periods when you do not work. So, for example, if you have children and work 16 hours a week during term time you may qualify for Working Tax Credit (WTC), depending on your income.
If you do not have a predictable pattern of work, you have to think about what hours you ‘normally’ work over a representative period. But if your work varies a lot and you often work less than the number of hours needed, you may find that you only qualify for WTC during the weeks when you work more hours. You can contact HMRC for advice. If they decide you are not entitled and you disagree, you can ask for a reconsideration and if necessary appeal.
Childcare costs in WTC
The childcare element is part of WTC and you must meet work conditions to get it. If you live with a partner, the work conditions affect them too and are slightly different to the conditions for WTC itself.
If you have further questions and would like to contact our advice team please use our advice contact form below or call us.