Tax credits
A tax credit is the money that is received by the citizens of UK from the Government on a regular basis. It need not be a tax deduction as those who do not pay tax also are entitled for tax credits. The tax credits can be paid straight into the eligible person?s bank account or through his/her wages or through the post office card account. The tax credits are given on a yearly basis and every year the claim has to be renewed. They decide the amount of tax credit applicable to each claimant based on the facts filled out by him in his claim. The information normally contain the details about the person?s work, income, if responsible for a child and if so the child?s education and expenditure details and the number of hours worked per week and many other relevant details. The HMRC decides who should receive the tax credit in case of any dispute about the eligibility. There are two different tax credits namely Child Tax Credit and Working Tax Credit.
Child Tax Credit
In the United Kingdom, all families with children born between 1985 and 2003 are eligible for Child Tax Credit if their annual income is less than 58,175 Pounds. If the child is under one year old, it can go up to 66,350 Pounds. You are eligible for the Child Tax Credit if you are a guardian of a child who normally lives with you. It is not necessary to be the parent of the child and those who are mainly responsible for that child can claim the Tax Credit. The British Government implemented the Children?s Tax Credit in April 2003 as a fore runner to the Child Tax Credit System in force now. In a Tax year the claim is allowed up to 520 Pounds. Those who had a baby in the year?s 2002 and 2003 can claim twice the annual claim of 1049 Pounds. The maximum is 1500 Pounds. This is given in the form of Tax refunds.
Working Tax Credit
The Working Tax Credit is given to those working and receiving low incomes, to supplement the income. Both employed and self employed can claim this. The amount depends on how much the current income and circumstances and if you have got children. Anyone person who is 16 years old or more and work at least 16 hours a week can claim the Working Tax Credit. The Working Tax Credit is worked out along with the Child Tax Credit. Those who do not have children can also claim Working Tax Credit.
The Working Tax Credit is directly paid to the claimant.
Who qualifies?
1. If you have at least one child under the age of 16 and in the tax year of 2002 -2003.
2. If you are married or living with a partner or a single parent
3. If you have not got the tax relief as yet
4. If you or your partner earned more than 6000 Pounds in the above two tax years.
5. If you work for at least 16 hours in a week and get paid for the work; and work at least four weeks or disabled or over 25 and work for more than 30 hours a week.
Usually those who live in the UK are eligible for the Child Tax Credit and the Working Tax Credit. But there are some exceptions. They are:
1. You can also qualify if you are a citizen of any other country in the European Union Area and you are currently working in the UK.
2. If you are working for the United Kingdom but work in another country.
3. If you are a citizen of the European Economic area living abroad and receiving a UK State pension or any of the contributions based allowances.
How to claim
There is a helpline phone for claiming the tax credits. The claim pack can be ordered by calling the numbers from 8 AM to 8 PM. The claim forms can also be picked up from the nearest HMRC Enquiry Centre or Jobcentre Plus.
Shared responsibility
A couple living together but are not married who take care of a child jointly can make a joint claim. If they are separated or your civil partnership has been dissolved, the person who has been given the main responsibility of the child should make the claim. If the child lives with more than one family, the family who has the main responsibility has to prefer the claim. If there is any dispute over who has the right to claim the tax credit, HMRC examines the facts and decides who should make the claim. So it is necessary to provide accurate and up to date information while submitting the claim for the tax credit.
Any change in situation should be informed without fail.
Claim renewal
The tax credit claims should be renewed every year with changes in circumstances incorporated in it. The dead line for renewals is 31st August. The change in employment or income should be confirmed. The HMRC usually sends the claimants a renewal pack sometime between April and July. The P60 given by the employer at the end of the tax year should be refereed to. If self employed the tax returns should be the proof of income. Details like your savings, benefits and any other income if any, should be included. In some cases the auto renewal notice is issued. Till the renewal application is processed the previous year?s amount is paid provisionally. If the claim is not submitted even on the 31st August deadline, the payment will be stopped and the award will also be cancelled. The cancellation notification will be sent by the MHRC. The award can be reinstated if you make your claim within 30 days of cancellation of the award. The payment of tax credit will be restored if the delay in the claim is sound.
Penalties
If the claim is too high based on incorrect information provided in the claim, the HMRC can impose a penalty of up to 300 Pounds. These penalties are designed to prevent dishonest claims.
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