Find Out About Working Tax Credit System
Working Tax Credits Defined:
• The working tax credit is an intricacy found within the United Kingdom’s taxation method. The working tax credit is a payment delivered by the state to people who work in a low income job. The working tax credit is part of the current tax credit system and a fundamental aspect of the means-tested social security platform established in the United Kingdom.
• The working tax credit system was originally instituted a transitional system from the earlier tax credit system that benefitted working families known as the Family Credit. The working tax credit system is a formal attempt by the United Kingdom to offer relief to those individuals who earn low incomes.
How does the Working Tax Credit System Work?
1. An individual taxpayer will file an application for a working tax credit to Her Majesty’s Revenue and Customs
2. Her Majesty’s Revenue and Customs will calculate a provisional amount of working tax credit to be awarded to the low-income applicant. The amount of tax credit is based on the previous tax year’s income and the current health of the macro economy. The working tax credit is then paid in either weekly or monthly installments to the claimant’s bank account until the end of the taxable year (typically on April 5th of the following year).
3. Following the end of the taxable year, Her Majesty’s and Customs will send the claimant Forms TC603R and TC603D (known as the renewal or declaration for working tax credits). These forms will ask the claimant to confirm their actual earned income for the completed year; for those who do not have access to actual income figures, they must deliver an estimate to Her Majesty’s Revenue and Customs by the 31st of July and confirm this situation by the following 31st of January. The deadline for these renewal forms is July 31st of the taxable year.
4. Following the delivery of such forms, a final calculation is offered by Her Majesty’s Revenue and Customs using the confirmed income. The final amount of the working tax credits may be higher, lower, or equal to the refunds offered in the provisional state, however, they are the affirmed working tax credit and the amount that will be delivered.
5. If an individual received more than the working tax credit calculation an overpayment is present and must be repaid to HMRC. Similarly, if the individual received less than the final working tax credit calculation, an underpayment is present and the individual is entitled to a lump sum payment.
6. The working tax credit is computed through an evaluation of elements that are pertinent to individual circumstances. The amount that the individual earns, a presence of children or a disability, the length (hours per week) that an individual works, the presence of a spouse and the length of employment are the predominant variables that make up the calculation for the working tax credit system.