06 Apr 2024

Working tax credit explained

Discover whether you're eligible to claim working tax credit, and how much you could receive in 2024-25

Marianne Calnan

In this article

What is working tax credit?
How much can you get?
Who's eligible for working tax credit?
Working tax credit elements in 2024-25
Working tax credit: how much will you get?
Working tax credit income thresholds
How are working tax credit and child tax credit linked?
Childcare element of working tax credit

What is working tax credit?

Working tax credit is a means-tested government payment to help with day-to-day expenses for working people on low incomes.

You can only claim for working tax credit if you:

Already receive child tax credit
Have claimed working tax credit in the past year.

Otherwise, you'll need to claim Universal Credit.

Tax credits are being replaced by Universal Credit. So you may still be able to claim tax credits in certain circumstances, but most people will need to claim Universal Credit instead. The Department for Work and Pensions (DWP) plans to move all existing tax credit claimants onto Universal Credit by the end of 2024.

How much can you get?

If you work a certain number of hours a week, and have an income below a certain level, you could get up to £2,435 working tax credit in 2023-24.

That figure is called the 'basic element' of working tax credit. This is the part that everyone claiming working tax credit receives, and it's based on how much you earn.

There are a number of extra elements that you might also be able to claim, but they depend on your circumstances. We'll explain what the extra elements are, and who they apply to, later in this guide.

You can get working tax credit whether you're employed or self-employed – you just need to be working in some way.

Who's eligible for working tax credit?

If the following circumstances apply to you, you might be able to claim working tax credit.

If you're single or in a couple and don't have children, you must:

work at least 30 hours a week
be 25 or older.

However, if you're disabled and work, or if you have children, you might be eligible for working tax credit if:

you work at least 16 hours a week
you're 16 and over.

You also need to be a UK resident to claim, but there are a few circumstances where you can receive working tax credit without living in the UK:

you're a citizen of a country in a European Economic Area (EEA) and you work in the UK.
you're a Crown Servant and have been posted overseas.
you're a citizen of an EEA country living abroad and you receive a UK state pension and/or contribution-based Jobseeker's Allowance (JSA).

If you're part of a couple – ie married to, in a civil partnership with, or living with a partner – you must claim tax benefits jointly. You can't opt to claim on your own.

Working tax credit elements in 2024-25

The table below shows the different working tax credit elements and how much each element is worth in 2024-25.

To find out the maximum amount you might be paid, you can add up all of the elements that apply to you.

Working tax credit element	Maximum amount paid 2024-25
Basic payment	£2,435 a year
A couple applying together	Up to £2,500 a year
A single parent	Up to £2,500 a year
Working at least 30 hours a week	Up to £1,015 a year
Disability	Up to £3,935 a year
Severe disability	Up to £1,705 a year
Approved childcare	Up to £175 a week for one child; up to £300 a week for two or more children

Depending on how much you earn, the amount you get through working tax credit may be reduced. We explain how and why your tax credits may be reduced in our section below on income thresholds.

Working tax credit: how much will you get?

Working tax credit is made up of a number of different 'elements' or payments. You may be eligible for just one element or for a few different elements, depending on your family circumstances.

Everyone who qualifies for working tax credit receives the basic element. This is worth up to £2,435 during 2024-25, depending on your income.

You can also receive extra elements depending on your circumstances, as we've shown in our table above.

The elements you are entitled to are added together, but HMRC reduces the amount you get as your income increases.

Working tax credit income thresholds

There are income thresholds in place, which mean that those on higher incomes will receive a reduced amount of working tax credit.

This can vary depending on your circumstances, but if, for example, you're not responsible for a child or a young person, then the amount of working tax credit you receive will start to be reduced if you earn more than £7,955 a year.

For every £1 of income over this threshold you earn per year, the amount of tax credit paid decreases by 41p.

Working tax credit reductions example

So, if your salary is £8,500 a year, you'll be earning £545 over this threshold.

For each pound, your working tax credit will be reduced by 41p – which can be worked out as 545 x 0.41 = 223.45.

This means that the maximum amount of working tax credit would be reduced by £223.45 over the year.

Find out more: use HMRC's tax credits calculator for an estimate based on your income and family circumstances

What counts as income?

When applying for tax credit, or renewing your tax credit, there are some types of income you have to report – no matter how much you earn. These are:

money earned through employment and self-employment
taxable social security benefits
student dependant grant
miscellaneous income, such as a business start-up allowance.

Other income sources only have to be reported if you earn more than £300 a year from them. Note that if you're claiming as part of a couple, this £300 threshold is shared between both of you. If you claim alone, you can still earn up to £300 without declaring these sources of income.

These are:

income earned on your savings, before tax
investments, such as company dividends
pensions
income from property
income from trusts, settlements and estates
foreign income.

You don't have to declare income from tax-free savings interest (earned by money saved in Isas) or rent received through the rent-a-room scheme.

How are working tax credit and child tax credit linked?

It's possible to claim working tax credit and child tax credit at the same time. If you qualify for working tax credit and are responsible for one or more children, you'll probably be able to claim child tax credit, too.

When you apply for working tax credit, you'll be told if you can apply for child tax credit – you don't have to apply for them separately.

If you have children, there are extra working tax credit elements you may be able to claim, such as:

the childcare element of working tax credit, if you're paying for childcare
the single parents' element of working tax credit, if you're raising your child by yourself.

Childcare element of working tax credit

The childcare element of working tax credit is an extra allowance to help working parents who spend money on approved childcare.

Approved childcare includes:

a registered childminder, nursery or play scheme
an out-of-hours club on school premises run by a school or local authority
a childcare scheme run by an approved provider.

With the childcare element of working tax credit, you can claim up to 70% of childcare costs to a maximum of £175 a week for one child, or £300 a week for two or more children.

Find out more: tax-free childcare and help with childcare costs – our guide outlines your childcare options.

How to renew tax credits

Unlike other benefits, tax credits usually have to be renewed each year by 31 July for you to continue receiving payments from HMRC.

The renewal process is necessary, as the amount of money you'll receive depends on how much money you earned in the previous year. So, how much you're paid in 2024-25 will depend on what you earned in 2023-24.

If you already claim tax credits, you'll usually receive a renewal pack through the post between April and July. If you haven't received it by July, contact the tax credits helpline on 0345 300 3900.

If your renewal pack just states 'check now', then all you need to do is see whether your details are correct. If they're correct, you don't need to do anything, as your tax credits will be automatically renewed. But if any of the information is wrong, you need to let HMRC know.
If there is a red line across the first page of your renewal pack and it says 'reply now’, then' you'll have to submit your information. Make sure you renew by 31 July or you might miss out on your payments.

You can either complete the forms and send them in the post, renew over the phone by calling HMRC, or use the online renewal service or HMRC app.

You'll need the following information to renew your tax credits, so it's a good idea to have it to hand before you get started:

Your National Insurance number
Details about any changes to your circumstances – for example, if your salary has changed
The 15-digit reference number on your renewal pack
Your total income for the last tax year. If you're applying for tax credits as a couple, you'll need to provide how much your partner earned too.

You must make sure all of your information is correct and up to date. Failure to do so could mean you'll have to repay any overpayments you receive and, if HMRC thinks you deliberately gave the wrong information in order to get more money, you could be fined up to £3,000.

Once you've renewed, the tax credit office will be in touch to let you know how much you'll be paid in tax credits next year. This should be within eight weeks of it receiving your renewal.

Failure to renew tax credits

If you miss the 31 July deadline to renew, your tax credit payments will stop. There might not be much you can do about it unless you have a good reason for being late.

What's more, HMRC may also recover any tax credit payments made to you between April and September, as you will have lost your right to the payments for the entire current tax year.

If you feel you had a good reason for being late, contact HMRC to explain. If it accepts your reason, you may be given until 31 January to renew, but it's at HMRC's discretion.

Not having accurate figures for how much you earn isn't a valid excuse for missing the deadline. If you're not sure, you can use estimated figures when you renew your tax credits. However, you'll need to provide the accurate amounts by 31 January the following year.

Reporting changes to your circumstances

You shouldn't wait until you renew your tax credits to let HMRC know if your circumstances have changed. You must tell HMRC within a month of certain changes happening or risk a fine of up to £300.

These include:

Relationship changes – if you're now living with someone, have got married or are in a civil partnership, or were claiming as a couple and have split up - HMRC needs to know.
Job changes – you must tell HMRC if you stop working, the number of hours you're working changes, you've been on strike for more than 10 days or you lose your right to work or live in the UK.
Childcare cost changes – if your childcare costs stop or reduce by more than £10 a week for at least four consecutive weeks, you must inform HMRC. The same goes if a child or young person you're responsible for moves out, starts to claim their own benefits, or starts or leaves full-time education or approved training, or starts paid work for more than 24 hours a week.

If you give HMRC the wrong information, you could be charged up to £3,000.

If you experience any changes to your circumstances that aren't listed but could have an effect on how much you receive in tax credits, contact HMRC as soon as possible – just in case.

Find out more: changes that affect tax credits

Working tax credit: your questions answered

We've answered some of the most common questions you might have about working tax credit below.

Tax credit can usually be backdated by up to a month. That's why, if your circumstances change – for example, you start working fewer hours – it's important to tell HMRC within a month of it happening. That way, if you're eligible to get paid more, you won't miss out.

If the change means you'll get paid less, but you don't tell HMRC, you'll have to pay back any extra money you've been given, which could leave you out of pocket. So, again, it's best to tell HMRC as quickly as possible.

You can choose to either get paid once a week, or once every four weeks. You can specify which you'd prefer on the claim form.

It can take up to five weeks to process a new claim, so you may have to wait a while. You'll be sent an award notice in the post to tell you when your first payment will be made.

You might get paid slightly earlier whenever there's a bank holiday, or some local holidays in Scotland. HMRC has a list of all early payments on its website.

Tax credit can affect other benefits. If you claim tax credit, you might find that you get less:

Housing Benefit
Income Support
Income-based Jobseeker's Allowance
Income-related Employment and Support Allowance
Pension Credit.

However, claiming tax credit might mean you get extra help with certain other costs, such as:

prescriptions and other health-related costs
if you're pregnant or have a child under 4, you could get help towards the cost of vitamins, milk and food
school-related costs, such as school meals, uniforms, transport and trips
funeral costs
court fees, legal costs and prison visits
home repairs from your council
the costs of heat and energy in your home.

Sometimes, people receiving tax credit payments are paid too much by HMRC.

You might be overpaid by HMRC if:

you don't give the correct information when you first claim or when you renew your claim at the end of the year.
you're late telling HMRC about a change in your circumstances or a significant increase in your income.
you give the wrong information when you tell HMRC about a change in your circumstances.
HMRC makes a mistake when processing your tax credit award.
HMRC doesn't act on information you have supplied.

This might sound like good news, but HMRC will demand you pay back the extra money, which can cause problems if you've already spent it.

If you think you've been overpaid, you should let HMRC know as soon as possible to avoid getting into debt.

HMRC will recover the money owed from future payments. If you no longer get the benefit, you will have to repay HMRC directly.

If you think HMRC has made a mistake, call the helpline. You should also bear in mind that fewer than one in 10 tax credit disputes are successful.

Find out more: tax credit appeals and complaints

Tax credits are usually considered to be a benefit because they're based on your circumstances and how much you earn. But they're different from benefits such as income support and housing benefit. For one thing, they're managed by HMRC, rather than the Department for Work and Pensions (DWP). What's more, you have to renew your tax credit claims each year, which you don't have to do with other benefits.

There are three instances where you may be able to deal with tax credits for someone else:

When you're an authorised intermediary contacting the tax credit office about someone else's claim.
When you take full responsibility for someone else's claim when they can't manage their own affairs – in this case you're an appointee
When you claim tax credits for your child who is under 16 and their baby, if they're both living with you. In this case, all tax credits will be paid to you.

To become an authorised intermediary, you must send a TC689 form to HMRC. Authorisation lasts for 12 months, and it usually takes two days for HMRC to process the form. The authorisation can be cancelled by writing to the tax credit office.

Appointees are usually used on behalf of people who are severely disabled or mentally incapable of dealing with their own tax credits. You can apply to become an appointee through the tax credit claim form, where you have to explain why the person can't complete and sign the form themselves.