Tax credit claimants were given additional support in early 2020 due to the coronavirus pandemic, with standard rates increased by £20 a week.
However, this support is now being wound down and replaced with a one-off payment.
Here’s what you need to know.
Why have my tax credits gone down?
For those receiving Working Tax Credit, the basic element of payments was increased by £1,045 per year to £3,040 from 6 April 2020, but this increase ended on 5 April 2021.
However, if a claimant is part of a working household that receives tax credits they may be eligible for a new one-off payment of £500.
This one-off payment has been introduced in order to provide extra support due to the increase in Working Tax Credit now coming to an end.
Am I eligible for the £500 payment?
You may get a one-off, tax-free payment of £500 if, on 2 March 2021, you were getting either:
- Working Tax Credit
- Child Tax Credit and were eligible for Working Tax Credit but you did not get a payment because your income is too high to get Working Tax Credit payments
Those eligible to receive the payment will not need to contact HMRC to apply, as HMRC will contact claimants by text or letter in April in order to confirm their eligibility.
Payments should be received by 23 April, but claimants will not see this payment on the online tax credit service.
It’s also worth noting that the payment will not affect the claimant's other benefits and will not need to be declared as income on Self Assessment tax returns.
Am I eligible for Working Tax Credit?
According to Gov.uk you can only make a claim for Working Tax Credit if you already get Child Tax Credit.
You must also work a certain number of hours a week to qualify.
If you cannot apply for Working Tax Credit, then you can instead apply for Universal Credit instead.
From 12 April, child benefit is also rising to £21.15 per week for the first child and £14 per week for subsequent children.
This is an increase of 10p and 5p respectively per week and means that the new monthly payments will be £84.60 for an eldest or only child, and £56.00 for any additional children.
Child benefit comes through every four weeks and gives claimants national insurance credits that then can count towards their state pension.
If a claimant or their partner earns more than £50,000 a year, a fraction of it must however be repaid at the end of the tax year.
This is at a rate of 1 per cent for every £100 earned over £50,000. If over £60,000 is earned in a year then the whole amount must be repaid.