Tax Credit payments are administered by HM Revenue and Customs (HMRC) and will be changing in April.
There are two types of Tax Credits – Child Tax Credit and Working Tax Credit. You can claim one or both, depending on your household circumstances.
Working Tax Credit is paid to people who are in work and on a low income – it does not matter whether you are an employee or self-employed, and you do not need to have children to get the payment.
Child Tax Credit is paid to people who have children and is paid in addition to Child Benefit - you do not have to be working to receive it.
The latest figures from HMRC show there were approximately 2.3 million claims for Tax Credits in April 2020, which included 1.1 million recipients of Child Tax Credits, 204,000 recipients of Working Tax Credits and 960,000 recipients who received both payments.
In March 2020, the UK Government announced that in response to the Covid-19 pandemic, it would be temporarily increasing the basic element of Working Tax Credits by £1,045 to £3,040 for the 2020/21 tax year.
This uplift was equivalent to an increase of £20 per week.
In the draft regulations’ explanatory memorandum, HMRC states that section 77 of the Coronavirus Act 2020 temporarily increased the basic element of the Tax Credit “for the 2020/21 tax year only”.
The act also enabled the basic element of Working Tax Credit to return to the April 2020 baseline rate (£1,995) for the purpose of “conducting the Treasury’s review of Tax Credit rates for the tax year 2021/2022”.
As a result, HMRC noted that the statutory annual review of benefits was “separate” from the temporary uplift which was “announced as a temporary measure in March 2020, and enacted for one year under different legislation”.
From April 6, Working Tax Credit and Child Tax Credit annual allowance rates will increase for the 2021 -2022 tax year.
Here are the details of the proposed new yearly payment rates.
Working Tax Credit rates for 2021/22 (yearly amount shown)
These changes will come into effect on April 6.
Working Tax Credit income threshold
2021/22 rate: £6,565
2020/21 rate: £6,530
2021/22 rate: £2,005
2020/21 rate: £1,995
Second adult and the lone parent element
2021/22 rate: £2,060
2020/21 rate: £2,045
2021/22 rate: £830
2020/21 rate: £825
Disabled worker element
2021/22 rate: £3,240
2020/21 rate: £3,220
Severe disability element
2021/22 rate: £1,400
2020/21 rate: £1,390
Child Tax Credit rates for 2021/22 (yearly amount shown)
Child Tax Credit income threshold
2021/22 rate: £16,480
2020/21 rate: £16,385
2021/22 rate: £545
2020/21 rate: £545
Increase: No change
Child and qualifying young person element
2021/22 rate: £2,845
2020/21 rate: £2,830
Child disability element
2021/22 rate: £3,435
2020/21 rate: £3,415
Severely disabled rate of the child disability element
2021/22 rate: £4,825
2020/21 rate: £4,800
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