How to claim tax credits

Tax credits are available if you are a low earner, are disabled or have children and many more people are eligible than they think. We guide you through what you need to know


Who qualifies?
If you are responsible for at least one child or young person who normally lives with you, you may qualify for the Child Tax Credit.
But you don't need to have children to qualify. For example if you are employed but are on low wages, you could be eligible for the Working Tax Credit.
For those who are married, or living with a partner, they are required to make a joint claim for tax credits, single claims can only be made if you don't have a spouse.

The easiest and quickest way to find out if you are eligible is to go to HM Revenue & Custom's website and complete its online questionnaire.
If you think you qualify for tax credits, make the claim immediately. If you hang on you could end up losing money because tax credits typically can only be backdated up to three months from the date HMRC receives your claim form.

How is it paid?
If you qualify the government will pay into your bank, building society, Post Office or National Savings account, if it accepts Direct Payment.
This will happen either weekly or every four weeks. In terms of who gets the credits, if you are both working and both qualify, for the Working Tax Credit, you can decide whose account they should be paid into. In regards to the Child Tax Credit the payment is will be credited to the account of the primary carer.
…and remember!

It might be worth making a claim, even if you think your income is too high. You may want to consider it, especially if you expect your income to go reduce – such as in the case of redundancy.


So which children can I claim for?
HMRC states: 'If you look after any children under the age of 16 - or under 20 if they're in full-time education or approved training - you may be able to claim Child Tax Credit to help with the cost of looking after them.'
You can claim for a child who lives with you, up to August 31 after their 16th birthday. If your child is between 16 and 19, you can still claim tax credits for them if they are still in full-time education, up to and including 'A' levels, NVQ level 3 or Scottish Highers or in approved training like Entry to Employment, Skillbuild and Get Ready for Work.

If your child is between 16 and 17, and they're not in full-time education or approved training, you can still claim tax credits for them for up to 20 weeks if they have signed up with the Careers Service, Connexions Service or Training and Employment Agency.

What happens to your tax credits when your child reaches 16?
What about those who have adopted or fostered?
You can claim once you are not getting any money from your local authority or Health and Social Services Board. If you are unsure about your situation, call the Tax Credit helpline on 0845 300 3900.

My child sometimes lives with me but sometimes lives with my former partner? Can I claim?
In such cases, just one of you can claim tax credits for them. Child Tax Credit is usually paid directly to the person who is the child's main carer.

If I qualify, how much should I expect to receive?
The major issue to be considered is your income. The basic rule of thumb is the lower your income, the more tax credit you are likely to receive.

Here are two examples from HMRC:

Example 1
Mr and Mrs Smith both employed full-time have a combined income of circa £25,000 per annum and they have three children. They get about £55 a week in tax credits. If their income was higher, and they earned about £50,000 a year, they'd get about £10 a week instead.

Example 2
Jon Barry is aged 30, not married and lives alone. He works full-time and earns £10,000 a year. He gets about £12 a week in tax credits.

Check out HMRC's Tax Credits Calculator to see how much you could get
How are they worked out?

Every year between April and June, HMRC, will contact you via post to help you renew your claim. It asks you to double check the information it has about your personal circumstances, such as confirming the amount of income you received in the latest tax year. HMRC will then ensure that the payments are made to you, and those due are correct.

Any tax credit you receive will be based on your present circumstances and currently on your income from the tax year that ended April 5 2008.
And for individuals making a new claim, payments will typically run from the date of the claim to the end of the tax year. For example, if an individual made a claim on November 10 2008, the payments will be worked out from that date until 5 April 2009.
But there are a number of other factors to be considered, when deciphering how much tax credits you should be paid.

These include:
•How many children you have living with you
•Whether you work - and how many hours you work for
•If you pay for childcare
•If you or any child living with you has a disability
•If you are aged 50 or more and are coming off benefits

How can I claim tax credits?
You need to complete a claim form. You can get hold of a tax credits claim pack from the Tax Credit Helpline on 0845 300 3900, or textphone 0845 300 3909. The helpline is open from 8.00am to 8.00pm seven days a week except Christmas Day, Boxing Day and New Year's Day.

Helpful forms and further information
You can fill the form in yourself and send it back by post. If you need any help completing it, contact the Tax Credit Helpline. And if you claim other benefits, such as Income Support, Employment and Support Allowance or Jobseekers Allowance, your Jobcentre Plus - or in Northern Ireland, a Social Security office - will help you with your tax credits claim form.

What if I am paid too little or even too much?
This can, and does happen. In such cases the Government, will make an adjustment to make sure your payments are correct. Any payments, that the Government makes from April 6 2009 to the date on which you renew your claim, are temporary or provisional. And if you do not renew it, you could be asked to pay them back.

I am disabled, what can I do?
The basic rule is - if you have a disability and usually work at least 16 hours a week, you may be able to get extra tax credits. In order to be eligible, you must usually work for 16 hours or more a week and you must have a disability that makes it hard for you to get a job and you must be receiving, or have recently received, a qualifying sickness or disability-related benefit. If you're not sure whether you qualify, you can, check the Disability Help Sheet found here or call the Tax Credit Helpline on Tel 0845 300 3900 or textphone 0845 300 3909.

In regards to those with severe disabilities, if you and/or your partner, receive the Highest Rate Care Component of Disability Living Allowance or the Higher Rate of Attendance Allowance, you may also qualify for extra tax credit as a result. And for couples, it does not have to be the person with the disability who is working, as long as one of you usually works at least 16 hours each week.

How much could you receive?
In this tax year, ending April 5 2009, alongside the Working Tax Credit you could get £2,405 a year if you are disabled or £3,425 a year if you are severely disabled. But the actual amount will depend on other money you have coming in.
In addition, you should inform HMRC if you make a claim for a sickness or disability benefit that would mean you get extra tax credits payments. If you are later told that you are entitled to the benefit, your extra tax credits payments will be backdated to the earliest possible date.

Are you paying Too Much Tax? Contact the Tax Reduction Specialists now!

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How to make the most of your child’s savings

Ask not what you can do for your child but what your child can do for you.

Gone are the days when you could send your child down a mine or up a chimney to help the family finances, but that doesn’t mean they can’t contribute.

In the past, children’s savings accounts have offered fairly poor interest rates. But base rate cuts have whittled away the interest rates on ordinary savings accounts leaving children’s accounts looking very attractive. The average instant-access rate for adults is now 0.97% compared to 1.3% on children’s accounts, according to Moneyfacts.co.uk, while the average rate for children’s regular savings accounts is 2.9% compared to 2% for adults.

When you consider that the interest is usually tax-free, the deal gets better and better.

How does it work?
A children’s savings account works just like an ordinary savings account, except that it is opened for a child. If the child is under seven, then a nominated adult (parent, guardian or grandparent) will have to act as signatory on the account. If the child is over seven, then they can open an account all by themselves. But don’t panic – rather than handing over cash for them to blow on High School Musical memorabilia, you can still set up an account that you are a signatory on until they are 16.

If you are a signatory on an account, then you can withdraw and manage the money. So while it’s their name on the account, you still control it.

What are the tax implications?
These accounts aren’t tax-free as such. Children pay income tax just like adults. But unless you have found a legal form of work for your pint-sized workforce then children will rarely use up their Personal Allowance – the amount they can earn before they have to pay tax – which is currently £6,035, rising to £6,475 on 6th April.

However, if you open an account for your child or step-child and that account earns more than £100 interest a year, then income tax at your own rate will be payable upon it. But this only applies to parents – it doesn’t apply to grandparents or anyone else who wants to put money into a child savings account.

In order to prevent tax being paid on interest payments to a children’s savings account, you will need to fill out an R85 form, which the bank should give you when the account is opened.

Which account should you open?
The best children’s savings account available at the moment is Halifax’s Children’s Regular Saver. This account pays 8% AER fixed for 12 months. As the interest is tax free this equates to a 13.28% return for a higher-rate taxpayer. Such a good deal does come with a couple of catches though.

The maximum deposit is £100 a month and if you miss a monthly payment or withdraw any of the cash before the end of the 12 months, then the account is closed and the money is transferred to a Halifax Save4it account. The interest is then paid entirely based on that account’s rate, which is currently 1.55%.

This account has another significant attraction though. Five adults can open the Halifax account for every child. And you don’t have to be related to the child. So Grandma, Auntie Val, Mum, Dad and even Bob from next door can earn 8% interest tax-free on a proportion of their savings.

If you want an account with fewer restrictions, then Ali Hussain in The Sunday Times suggests the Yorkshire Building Society’s One Day Account. This has the best easy-access rate at the moment, 2.25% on savings above £10. With this account you can make unlimited withdrawals without incurring any penalties. And as long as you stay beneath the limits the money is tax-free. So parents can put up to £4,400 into the account before it starts getting taxed (as that would generate about £99 in interest payments) – just below the £100 limit.

However, you can easily get cash Isas that beat this rate, so unless you’ve already filled up your Isa for this year (and the next tax year is coming up in just a couple of weeks – April 5th is the deadline), this isn’t worth considering.

So put your child to work – march him or her to the nearest bank right now!

Five ways to slash your rental profits and reduce your tax bill

With interest rates having fallen again last week to 0.5%, landlords with discounted, variable or tracker rates will be benefiting from lower interest charges on their loans. This, of course, means more positive cash flow, but it also means much higher taxes in the future. Here are five ways to slash your landlord taxes:

1) Claim tax relief on ALL revenue expenditures Remember - If you have incurred a revenue expense for the purpose of your property, then you can offset it against the rental income. Most landlords remember to offset the mortgage interest against their rental income but they fail to offset other costs, such as insurance, utilities supplies, decorating/repairs and advertisement costs, along with letting agent fees and the cost of telephone calls etc.

2) Make sure you register any rental losses If you have made losses in the previous tax years then by registering these losses with HMRC you will be able to carry them forward and offset them against future profits. Given that interest rates have fallen significantly since October 2008, if you have registered your losses then you could be making very good cash flow on your property now and still avoiding taxes in the future.

3) Switch property ownership with your spouse if they are lower rate taxpayers If you have a spouse who is a lower rate (or even nil rate) taxpayer and you are a higher rate taxpayer, consider moving the greater portion of the property ownership into their name. This means that a greater part of the profit will be attributed to the lower (or nil rate) taxpayer, resulting in both your income and capital gains tax liability being significantly reduced.

4) Mix and match the 10% wear and tear allowance If you are offering a fully furnished property then it may be tax beneficial to use the 10% wear and tear allowance. This is because you can start to claim the relief as soon as you start to receive income from the property.

5) Look to claim costs as 'Revenue' costs If you can claim large costs as ‘revenue’ costs rather than ‘capital’ costs then you can reduce your annual property income tax bill in a big way. For example, the cost of replacing single glazed windows with double glazed windows can be claimed as a revenue expense.

Are HMRC watching you?

Mark Lee, Chairman of the Tax Advice Network, has issued a warning that HMRC are cracking down on businesses that use the internet to trade. As part of this they are monitoring social media and blogging sites in the same way that they monitor small ads in local papers and more recently Ebay and other online ‘auction’ sites. There are two things taxpayers need to remember. First, any information about their business that gets published on the web may be looked at by HMRC. Second, any income earned online – even relatively small sums, perhaps earned as an affiliate – must be declared.

There are literally hundreds of online social media websites and facilities available to those wishing to do business and many have a big focus on business as distinct from, or in addition to the ‘social’ aspect of the site. The most common business focused sites include Ecademy, LinkedIn, BT Tradespace and UK Business Forums. In each case forum comments, member profiles and blogs effectively remain in the public domain forever, even after someone thinks they have deleted it. The same is true of personal websites and blogs, which appear to be promoting a business, or through Google Adsense campaigns or through affiliate sales.

Are you paying Too Much Tax? Contact the Tax Reduction Specialists now!

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March Tax Tips

To read March Tax Tips and find out ways to save tax before the end of this tax year click HERE

Are you paying Too Much Tax? Contact the Tax Reduction Specialists now!
http://www.tax-sorted.biz
http://www.welovebookkeeping.co.uk
http://shaunstaxtips.blogspot.com
http://www.stinkybooks.co.uk