Tax Credits 101

Greetings.  As previously mentioned, I have promised to stop writing about the Royals. So, now back to writing about things I know about to include: Welfare Benefits, The English Legal System, Tea, Dark Chocolate and Downton Abbey. So, let’s do this.

Tax Credits. What? Why? How?

A State benefit which provides extra money to children, disabled workers or persons on a low income. But not in that prescribed order.  Essentially, tax credits re-distributes income by giving money to families with children or persons who work on a low income. Critics say it is a handout, while supporters disagree and say that it is instrumental in relieving poverty. I say nothing. Instead, I remain on this fence of mine-hello Switzerland, nice to meet you.

Tax credits were introduced back in the 1990’s by our illustrious chancellor, Gordon Brown. Mr. Brown introduced:

-Working Families Tax Credit

-Disabled Persons Tax Credit

-Child Tax Credit

The aim was to help families in low paid work to help make ends meet. Also, with the hope of removing families of being reliant on welfare. So, instead of having your benefits withdrawn when you returned to work-people on a low income and with kids (or not) would get to keep some of their benefits.

In 2003 Child Tax Credit and Working Tax Credit increased by A LOT. In brief, tax credits have made a significant impact and have subsequently decreased child poverty here in the UK since the war. So, yeah for that. I mean, this can only be good-right?

Show me the money

How many people claim Tax Credits? Approximately 4.5 million people in the UK (4 million of whom have children). People may be eligible (broadly speaking here) if they earn less than 32K. If their income is below this level and they have kids then they will be eligible for child tax credit. Further, eligibility for working tax credit depends on how many hours a person works.

The average award of tax credit is 6K per year. But it can exceed this. Also, Child tax credit claimants receive £545 as a flat payment in addition to 2K per child. In regards to working tax credit (stay with me-nearly done) claimants must work at least 16hpw if they are single or 24hpw if they have kids and 30hpw with NO kids.  They get a basic of 2K plus extras. PLUS, claimants may get up to £210 pw to pay for childcare. Can you say ‘generous?’

But here’s the thing, it is possible that what you receive in tax credits will surpass your earnings and that is no bueno. Enter George Osborne, our Chancellor. See picture. George Osborne, our magnanimous chancellor is frankly fed up with uncontrolled welfare spending (which includes tax credits) and says that it is a threat to our economic security. Perhaps he is correct.  Further, Osborne does not want to “lose sight” of his long-term goal of a “low-welfare, high-wage economy.” Good luck with that pipe dream George, this is not Sweden.

Recently, the House of Lords voted to delay the 4.4bn cuts and compensate losers in full. Boy, weren’t those Conservative MP’s cross? MP’s are elected after all and the Peers in the House of Lords are unelected. So, it’s all gone a bit ‘Pete Tong’ now. My advice to you, dear reader is to watch this space….

Cheers Y’all

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