When an individual is working towards debt reduction and, ultimately, debt elimination it is important to make sure any benefits he or she is entitled to claim are not overlooked. Often an extra monthly benefit payment can make all the difference to a monthly budget; in some cases, this extra income can be the start of finding permanent debt solutions.
Tax credits are payments from the government that many people are entitled to, but which are often overlooked by those who are unaware that they are eligible to claim them. There are two different types of tax credit, which can be summarised as follows:
Working Tax Credit – The Working Tax Credit is only paid to people who work; it is based on the number of paid hours worked. It applies to both employed and self-employed workers. This benefit can be claimed by individuals who do not have children. There is also a childcare element to the Working Tax Credit and so it is worth checking eligibility for those who work and pay childcare costs.
Child Tax Credit – This is paid to families responsible for one or more child who have a combined income below a certain amount. There is no need to be working to claim the Child Tax Credit. Nine out of ten families with children are eligible for tax credits.
As well as income levels, some of the factors that are taken into account when calculating eligibility for tax credits are: the number of children that are living with the claimant; whether the claimant is single or part of a couple; whether the claimant works and, if so, how many hours; if the claimant pays for childcare; if anyone in the family has a disability; if the claimant is 50 or over and coming off benefits.
The quickest way to find out whether an individual is eligible for tax credits is use HMRC’s online tax credit calculator. A claim form will need to be completed to apply for tax credits, which will then be assessed.
Once in receipt of tax credits, claimants are expected to keep the tax office informed of any change in circumstances. If overpayments are made because of a change in circumstances and the tax office was not informed, the overpayments will usually need to be repaid. Changes that must be reported are a change in working hours, a change in status such as getting married or moving in with a partner, and a change in childcare arrangements.
A renewal form is sent out to claimants every April, May or June and it is very important to complete and return this form, even for those who are not eligible, as this ensures the correct tax credits were paid in the last tax year. It also means relevant details are kept on the system in case eligibility changes in the future.
Making sure that all available benefits are claimed can sometimes help those struggling with their finances. For anyone who needs additional debt help, there are various debt solutions available that can help to achieve debt reduction. This can be the first step towards eliminating debts and re-establishing financial control.
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