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Tax
payback - Tax credits
The new Child Tax Credits
(CTC) and Working Tax Credits (WTC) were introduced in 2003, and suffered from serious teething trouble - and the need for filing a long and complicated form, which the claimants didn't like and the Revenue had trouble processing. The system may settle down better for its second year.
The basic CTC (about £10 a week) is payable to a couple with a qualifying child and combined income of up to £50,000. Above that, it reduces to nothing by the time total income is about £58,000. The form may be longer and more complicated than seems reasonable (when a lot of the information is already provided to the Revenue on the tax return), but £545 a year probably pays for the effort. If both members of a couple work and therefore have significant childcare costs, WTC can make a substantial contribution, even on levels of income above £30,000.
It's worth looking into, particularly if your income goes up and down, and is not predictable at the beginning of the year. To start with, a claim is based on last year's income - 2003/04 for the 2004/05 payment year - and it's then revised at the end of the year based on actual income. If you make a claim at the beginning of 2004/05 based on 2003/04 income of £100,000, your claim would be noted but you would receive nothing. If by the end of the year your income has fallen to £30,000 for some reason, you would get the higher level of payment - maybe £3,000 - backdated to the beginning of the year. If you only bother to claim at the end of the year when you know your income is low enough, you only qualify for payment from three months before you claim.
This "protective claim" idea has added to the Revenue's burden this year - they actually encouraged people to claim when they wouldn't qualify immediately, in case they did so later. Until they change the rules, it makes sense to think about a claim even if your past income is above the limit.
| Action Point! |
| Should You Claim The Ctc Or Wtc? |
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