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Tax
Credits
Tax Credits are the
main way in which the tax system provides support
to people with children and workers on low incomes.
Tax Credits are paid to those who claim them, and
are not an adjustment in the tax computation.
Working Tax Credit (WTC) is paid to employed and
self-employed people on low incomes. The full entitlement
is given for an income of only £5,220, and
it is tapered away as a couple's joint income
increases above that.
There is an additional element which will cover
80% of qualifying childcare costs of up to £300pw
for two children, and a couple entitled to this
can enjoy substantial credit even on incomes over
£30,000.
Child Tax Credit (CTC) is paid to the main carer
for children up to 16 years old, or up to 18 in
full-time education. Entitlement is built up of
elements for each child, and for "the family".
The child elements are tapered away as income increases.
The family element of £545 will be paid in
full to couples with a combined income of up to
£50,000; after that, it will be tapered
away to nothing by the time the joint income reaches
£58,000, or £66,000 in the year a child
is born.
Claims are made provisionally for the coming year
based on a previous year's income (2006/07 for
2007/08 claims), and may be revised up or down at
the end of the year if income has changed significantly.
However increases in income will be disregarded
if they are up to £25,000.
The Tax Credits system is very complicated, and
this can only serve as a brief summary. The HM Revenue
& Customs website (www.hmrc.gov.uk)
has a ready-reckoner facility which will estimate
the amount of either tax credit due, and also has
forms and details of how to apply. |
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