Tax credits

What are the different tax credits?

There are two types of tax credits, the WTC and the CTC. Currently you are only eligible to claim for one of these, if you already receive the other one.

As per the HMRC website, if you are not currently receiving any of the two tax credits, you will have to direct new claims to Universal Credit instead.

Working Tax Credit (WTC)

The Working Tax Credit is paid out to people who work and have a low income.

Child Tax Credit (CTC)

The Child Tax Credit is for those who are taking care of a child. This tax credit does not affect your Child Benefit.

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Tax credits are being replaced by Universal Credit

As mentioned above a new system called Universal Credit is currently being phased in to replace a number of credits and benefits:

Working Tax Credit
Child Tax Credit
Housing Benefit
Income Support
income-based Jobseeker’s Allowance (JSA)
income-related Employment and Support Allowance (ESA)

How to make a new tax credit claim?

New claims for tax credits should instead be made through the Universal Credit system, which you can find via gov.uk.

What if I already receive tax credits?

If you claimed tax credits before the transition started, you will not be affected unless:

You have a change of circumstances that requires reporting
The government will send out something they call a “Migration Notice”, informing you to start claiming Universal Credit instead of the tax credit(s) you are already receiving

The transition to Universal Credit is expected to be complete in 2028.

FAQ

Are tax credits taxable?

While some benefits are subject to tax, tax credits are not. And neither is Universal Credit.

Are tax credits a state benefit?

For all intents and purposes, yes. It is however managed by HMRC instead of the Department for Work and Pensions.

How do I know if I'm eligible for tax credits?

Gov.uk has made a calculator to help you find out if you are eligible to receive Universal Credit or other benefits. You will need accurate information about your financial situation to get a usable result.