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.
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. HMRC state that it is no longer possible to make brand new claims for tax credits. See our who can claim page for more information. It is possible for existing claimants to renew claims.
Entitlement is determined for an award period. This is usually 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 ends part way through a year. However, at the latest, all claims end on 5 April each year and a new claim must be made for the new tax year if entitlement is to continue. 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 usually 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 formally established until after the tax credit award has been finalised after the end of the tax year, 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 from the start of the tax year, 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.
Where a tax credit claimant makes a claim for Universal Credit (UC) in the same tax year as they had a claim for tax credits, their tax credit award will stop with effect from the day before the UC claim starts and the tax credit award will be finalised at that point (or very shortly after). In those cases, the tax credit award period will usually end before the end of the tax year and calculation of the tax credit award will be based on the shorter award period. This is sometimes referred to as 'in-year finalisation'. The way income is calculated for the stopping tax credits process is different from the standard principles which apply in the normal calculation. See the Universal Credit - Finalising Tax Credits section for more information.
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.
Last reviewed/updated 14 April 2022