Tax Credits: Entitlement

This part of the site outlines the qualifying conditions for both WTC and CTC.

The first step in calculating a person’s entitlement is to work out their maximum amount. To do this, an assessment of the claimants’ circumstances is needed to establish what should be included in calculating that maximum rate.

Basis of entitlement
Elements

Basis of entitlement

The Tax Credits Act 2002, section 3(1) states that entitlement to a tax credit for the whole or part of a tax year is dependent on the making of a claim. You can find out more about who can claim in our claims section

Entitlement is determined for a tax year which runs from 6 April to 5 April. This is also the basis of assessment of Income Tax. Claims can run for shorter periods, for example where a claim is made part way through the year. However, all claims end on 5 April each year and a new claim must be made. This is normally done as part of the renewals process.

Tax credits are ultimately based on a person’s circumstances and income during a tax year. Income is generally not known until after the end of a tax year, and so tax credits are designed so that entitlement for a particular tax year is not finalised until some time after the end of the tax year. It is for this reason that HMRC guidance states that entitlement is what the claimant is due for the year, which may turn out to be more or less than the amount awarded at the beginning of the year and paid during it.

Because entitlement is not established until after the tax year has ended, the tax credits legislation uses the term ‘award period’ to cover the period for which a tax credits award is made. In most instances, such as when the claim is made before the tax year starts, this will be the tax year itself from 6 April to the following 5 April. In other cases it will be from the effective date of claim until the following 5 April.

Elements

As stated above, the first step in the calculation of a person’s entitlement is to work out their maximum entitlement for WTC, CTC or both.

Both WTC and CTC comprise a number of elements. A claimant’s circumstances must be carefully checked against each element to work out which ones they are entitled to have included in their maximum rate. To be entitled to WTC, everyone must meet the criteria of the basic element. Only if those criteria are met can any of the other WTC elements be added to the claim.

You can click the links below to find out detailed information about the elements of Working Tax Credit and Child Tax Credit.

Updated 23 May 2016