Am I Entitled to a Working Family Tax Credit?

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The United Kingdom's (U.K.) working family tax credit is actually a combination of the "Working Tax Credit" and the "Child Tax Credit". The latter is a component of the former, and is only available to one or two-parent families with a child younger than 16, or 19 if a full-time student.

Entitlement to the Working Family Tax Credit

A taxpayer's entitlement to the working family tax credit depends on whether they satisfy the criteria for both the Working Tax Credit and the Child Tax Credit. Failing to meet one of the standards eliminates eligibility.

The Working Tax Credit

The Working Tax Credit (WTC) is available to U.K. citizens at least 16 years old and working more than 16 hours per week, are paid, expect to work for a minimum of four weeks per year and pay taxes in the U.K. Self-employed individuals are entitled to the credit.

Eligibility also depends on the taxpayer meeting one of the following requirements.

If you don't have children, you must be:

  • At least 16 years old and disabled and work for at least 16 hours a week
  • At least 25 years of age and working a minimum of 30 hours per week
  • At least 60 years of age and working at least 16 hours per week

If you have children:

  • If you are single, you need to work at least 16 hours per week
  • If you are part of a couple, your total working hours between the partners should be at least 24 hours with one person working at least 16 of the hours

If a couple who has children works for less than 24 hours a week, they can still qualify for credits:

  • If one partner is 60 or older and works at least 16 hours a week
  • If one is disabled and works at least 16 hours a week
  • If one person works at least 16 hours a week and the other member is eligible for Carer's Allowance
  • If one person works at least 16 hours a week and the other person is incapacitated, in the hospital, or in prison

Married taxpayers must file jointly for it and identify the individual in the couple who receives the credit. Non-U.K. citizens may still receive the credit if they are a citizen of another European country, but work in the U.K., are a government employee stationed abroad or are a citizen of another European country, but receive U.K. government benefits.

The Child Tax Credit

The Child Tax Credit (CTC) gives U.K. taxpayers a credit for supporting a child under the age of 16, or 19 if they are a full-time student. The taxpayer does not need to pay for childcare, but doing so increases the amount of the credit. The criteria for the CTC are the same as that for the WTC, but with the additional requirement that the household have at least one child under 16.

Determining Entitlement to the WFTC

HM Revenue and Customs offers taxpayers an online program, titled "Do I Qualify" to determine if they are entitled to the WFTC. The program consists of 14 steps, during which the taxpayer provides:

  • Birth date
  • Marital status
  • Number of children under 16 in the household, their ages and whether any are disabled
  • Weekly childcare costs
  • Yearly income, including government benefits
  • Employment status
  • Number of hours worked per week

The program calculates the amount of WFTC based on this information. It is possible that the taxpayer may be ineligible for the credit.

The Amount of the Credit

The amount of credit a taxpayer receives depends on their family circumstances, their income, and their number of hours of work per week. The number of children you support and the amount of money you pay for childcare plays a role as well.

American Counterpart Tax Credits: CTC and EITC

The Internal Revenue Service in the U.S. offers several family credits to taxpayers. The first of these is the Child Tax Credit (CTC). The CTC provides taxpayers with dependent children a credit based on their income. The credit may be as much as $1,000 per-child is available, but can only be claimed on a 1040, 1040A or 1040NR. Maximum income limits for 2012 are:

  • Married Filing Jointly: $110,000
  • Married Filing Separately: $55,000
  • All Other Taxpayer Statuses: $75,000

Taxpayers with incomes exceeding the maximum must reduce their credit by $50 for every $1000 of excess income. However, they may have 15 percent of that reduction refunded to them by filing the Additional Child Tax Credit form.

Taxpayers with dependent children may also claim the Earned Income Tax Credit (EITC). This credit is available to low-income individuals with dependent children. The exact amount of the credit depends on the number of children the taxpayer claims on their return.

Claiming Your UK Credit

You must contact Her Majesty's Revenue and Customs by phone at 0854-300-3900 to receive the appropriate form for your credit. A representative will mail the form to you and guide you as to its completion. Alternatively, you may file for the credit online, through the division's website.

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Am I Entitled to a Working Family Tax Credit?