What the working tax credit changes mean

Q: Who is currently entitled to working tax credit?

The idea behind the working tax credit (WTC) is to make sure that people in work will be better off than those on benefits, and it works by topping up the income of low earners working part-time.

If you are over 25 and do not have children, you may be entitled to WTC if you do at least 30 hours of paid work a week and earn £12,000. As long as you work at least 16 hours a week, WTC can also be also be claimed by single parents or couples with at least one child; over 50s who are starting work after being on benefits for at least six months; those who spend money on registered childcare; and workers with a disability.

Q: How much is it currently worth?

The “basic element” of the WTC is £1,920 per year. Couples who make a joint claim and lone parents can be entitled to an additional £1,950. If you work at least 30 hours a week, you may be entitled to an extra £790, and there are additional amounts for disabled workers and parents with disabled children. The over 50s who have been out of work for six months are entitled to £1,365 a year, or £2,030 for over 30 hours a week. The 2011-2012 amounts are likely to stay the same in the coming financial year.

Q: How will couples with children be affected by the changes?

The main proposed change to the WTC applies to the number of hours worked before you are allowed to claim it. For couples the joint working hours needed to claim WTC would rise from 16 to 24 per week, with at least one person working 16 hours. If this doesn’t apply, WTC will stop from 6 April.

Official Treasury figures estimate that the change will affect 212,000 couples earning less than £17,000 who will lose £3,870 a year if they can’t increase their working hours – that is 424,000 adults and 470,000 children. Couples with children in their 60s aren’t affected. The changes will vary depending on income, hours worked and other benefits, including the amount spent on childcare.

Q: How will single parents be affected?

According to the proposed changes, single parents of all ages will still be entitled to WTC as long as they continue to work 16 hours a week.

Q: Will couples be better off on benefits?

The amount couples are entitled to will vary depending on income, hours worked and other benefits. The Treasury has a list of examples here outlining how the tax changes in the budget will affect people in different scenarios.

But in answer to a parliamentary question on 29 February, the employment minster said that the income of a couple with two children working 16 hours a week on minimum wage will be on £257 a week after the change. If they stop work and just receive benefits it will be £271 a week.

Q: How will over 50s be affected?

For over 50s with children, the same rules apply to couples and single parents. And single over-50s without children will still be entitled to the basic element of WTC if you work at least 30 hours a week.

However the so-called “50-plus element” of the WTC (applicable to those who have been out of work for more than six months) will be stopped altogether from April.

Q: Are there any exceptions to the changes?

The over 60s and those with a disability will still be entitled to WTC as it stands – as long as you work for 16 hours a week. Payments to single parents will remain largely unaffected, as well as those to over 25s who work over 30 hours a week.

Q: What if you are self-employed?

WTC can be claimed by self-employed as well as the employed, but only if you expect to work for at least four weeks at a time.

Read more from FactCheck: Who’s the government kidding on childcare benefits?

Q: Can you ask your employer for more hours to push you over the 30 hour threshold?

You can ask – and the hope is that employers will be able to create more work to increase families’ income. But studies suggest that few employers are able to offer more hours, and therefore more pay. A survey of employers by Working Families found that 17 per cent are confident they will be in the position to offer more work, while Usdaw found that 78 per cent of their members, who will be affected by the changes, are unable to work additional hours.

Q: What happens if your circumstances change?

Currently, if a change in your circumstances means your payments go up, you’ll usually get the higher amount backdated for up to three months. However, this is changing. From 6 April, if you report a change that means your payments go up, the amount of backdated pay reduces to one month. So it is worth your while calling the tax credit helpline as soon as possible to get your entitlement.