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

Increase: £35

Basic element

2021/22 rate: £2,005

2020/21 rate: £1,995

Increase: £10

Second adult and the lone parent element

2021/22 rate: £2,060

2020/21 rate: £2,045

Increase: £15

30-hour element

2021/22 rate: £830

2020/21 rate: £825

Increase: £5

Disabled worker element

2021/22 rate: £3,240

2020/21 rate: £3,220

Increase: £20

Severe disability element

2021/22 rate: £1,400

2020/21 rate: £1,390

Increase: £10

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

Increase: £95

Family element

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

Increase: £15

Child disability element

2021/22 rate: £3,435

2020/21 rate: £3,415

Increase: £20

Severely disabled rate of the child disability element

2021/22 rate: £4,825

2020/21 rate: £4,800

Increase: £25

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