If you are currently getting tax credits, your entitlement may be affected by the coronavirus pandemic.
Child tax credit (CTC) provides support for children in lower income families, and working tax credit (WTC) provides support for people working at least a certain number of hours, employed or self-employed, on a low income.
Tax credits do not include help with rent, but if you are already entitled to housing benefit, you can continue to get it and the amount you get may go up if your income has gone down.
This briefing covers:
The basic element of WTC was increased by £1,045 for the 2020/21 financial year only and this uplift will not be extended to 2021/22. Instead, a one-off payment of £500 will be made to anyone who was entitled to WTC with an award of more than nil on 2 March 2021. The payment is a lump sum, separate from the tax credit award, and does not affect other benefits. Payments are due to be made automatically, by 23 April, with no need to apply.
Claiming universal credit
If you do not have enough to live on, you may be advised to claim universal credit (UC), which can include help with your rent as well as amounts for adults and children in the household. Claiming UC means that your tax credits are automatically terminated and you will not be able to get them back.
Get advice about whether you should claim UC to make sure claiming will not make you worse off if you are currently getting tax credits. This depends on your individual circumstances and income. Some common situations in which you may lose out by claiming UC are described below.
•You have capital over £16,000. This is the capital limit for UC, so you will not be entitled to UC, but you will still lose your tax credits if you claim UC. The value of your home is ignored, but the value of any other property you own may not be. Property can be disregarded in some situations, for example if you are trying to sell it. Capital can still be counted against you if you deliberately dispose of it in order to claim UC. If you are self-employed, business assets are ignored while you are carrying on work, or for at least six months if you are unable to work due to illness.
•You are a student. Most students are not entitled to UC. You may be entitled to UC if you have children or a disability, but student income affects the amount you get. Nearly all student income is ignored for tax credits.
Staying on tax credits
On furlough, reduced hours or shielding due to coronavirus
You can remain entitled to working tax credit during the coronavirus pandemic. This applies to you if you are:
•a furloughed employee (including flexible furlough) under the government’s ;
•an employee and your employer has notified that you are not required to work due to coronavirus;
•an employee or self-employed worker and you have had to reduce your hours or stop work temporarily due to coronavirus;
•you are on furlough and your job ends, but within four weeks accept an offer for another job of sufficient hours, and are then not required to work any or all of your contracted hours due to coronavirus; or
•unable to work as you are ;
You are treated as still working your normal hours (at least 16, 24 or 30 hours a week) in these circumstances. These rules apply for as long as the government's Coronavirus Job Retention Scheme remains open (currently due to end 30 April 2021).
You are also treated as in work for a further 8 weeks after these circumstances no longer apply to you, or after the Coronavirus Job Retention Scheme has ended, as long as you return to work and intend to resume working sufficient hours. If after the end of the 8 week period you are not working sufficient hours, you will be entitled to a four week run-on of working tax credit.
After these circumstances no longer apply to you, if you do not return to work or your hours are permanently reduced to less than required, you will be entitled to a four week run-on of working tax credit.
You are also treated as in work during any period that you are on leave from work because you are an emergency volunteer in health or social care.
HMRC has if you are working less due to the coronavirus.
You must notify the Tax Credits office if your job has ended (ie, you have been dismissed or made redundant and your employer has or if your business has ended (ie, you have
Off work due to infection, self-isolation or caring for a child who is infected or in isolation
You can continue to be entitled to WTC if you are absent for work and you are:
•notified to self-isolate by NHS testing and contact tracing;
•instructed not to work due to coronavirus restrictions;
•getting statutory sick pay (SSP) as an employee (you can qualify for SSP if you are unable to work due to coronavirus in various situations, including caring for a child who is infected or in isolation);
•are self-employed and would otherwise have qualified for SSP;
•are getting employment and support allowance (ESA); or
•are getting credits on your national insurance record for limited capability for work.
Periods on SSP, ESA or credits for limited capability for work must start immediately after working (or a period on furlough, reduced hours or shielding due to coronavirus) and can continue for a maximum of 28 weeks.
If you are a key (critical) worker, you have three months, instead of the normal one, to report changes of circumstances that reduce your tax credits. You cannot be given a penalty if you report a change within three months. An overpayment may arise, but HMRC has discretion not to recover any overpayment.
If you are a key worker, you also have three months, instead of the normal one month, to report changes of circumstances that increase your tax credits. You will be entitled to the increased amount backdated for up to three months, or longer in relation to disability elements.
These rules apply for as long as the government’s Coronavirus Job Retention Scheme remains open. Follow the links below to:
You are entitled to the childcare element of WTC for registered childcare provided for a child for whom you are responsible. It covers 70% of your average weekly costs, up to a maximum payable of £122.50 for one child or £210 for two or more children. To qualify for the childcare element, you must continue to be entitled to WTC (see above) and paying for childcare. You continue to be entitled to the childcare element if you stop paying for childcare costs for less than four weeks. The amount of the childcare element only changes if your average weekly childcare costs change by at least £10 a week for four weeks in a row.
Stopped paying for childcare
If you have stopped paying childcare costs or you are no longer employed or self-employed, there is a four week run-on in which you remain entitled to the amount of the WTC childcare element you were getting.
Paying for childcare that is not being provided
If you are still paying your registered childcare provider but childcare has not been provided due to coronavirus, the childcare element of WTC will stop after four weeks. Your child must be attending childcare in order for you to get help with childcare costs.
Paying in advance for childcare
The childcare element can continue if you are paying in advance for childcare that will be provided in future. For example, if your childcare provider has asked you to continue paying, say, half your regular fees while your child is at home, but has said that you will then get a 50 per cent reduction on the fees when you child is able to attend again in future, this can still be covered by the childcare element in WTC. You must report the change in the amount you are paying.
Your tax credit entitlement for 2020/21 will usually be finalised by 31 July 2021. This will take into account your actual income in 2020/21, compared to your 2019/20 income.
Your renewed tax credit award for 2021/22 will initially be based on your 2020/21 income.
For these reasons, you should confirm or declare your actual income for 2020/21 as soon as you can, and provide an estimated income for 2021/22. If things change, it is vital to keep your current year estimate up to date.
If you are an employee and receiving wages through the government’s Coronavirus Job Retention Scheme, this counts as employment income.
If you are self-employed, payments through the government’s Self-Employment Income Support Scheme and any other government support scheme for the self-employed count as taxable income for tax and tax credits purposes. They should be declared as part of your annual self assessment for 2020/21 and you should usually declare the same profits to the Tax Credits Office.
If you are an emergency volunteer in health or social care, any payments you receive in connection with this scheme do not count as income.
Payments instead of free school meals and Covid Winter Grant Scheme payments do not count as income.
The £60,000 death in service lump sum payment for families of frontline NHS workers is capital so does not count as income, but interest on it does count as income.
Self-isolation support payments are disregarded.
Contact the Tax Credits Helpline on 0345 300 3900 or online using
Recovery of overpayments
Recovery of overpayments is discretionary, and HMRC has the power to suspend recovery in exceptional circumstances. If recovery is causing you hardship, contact the Tax Credits Payment Helpline on 0345 302 1429 to request that recovery is suspended during these exceptional circumstances.