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Significant changes will be made to both Working Tax Credit (WTC) and Child Tax Credit (CTC) from April 2011 through to April 2013. In April 2014 these benefits will be abolished and replaced by the new Universal benefit which will be introduced from late in 2013.
Reducing awards by reference to household income
Presently the family element of £545 is paid in full as long as income does not exceed £50,000. The £545 is gradually reduced or tapered to nil when your income reaches £58,175.
From April 2011 the family element will remain at £545, but will be payable in full at income up to £40,000, and will be tapered to nil at income of £43,892.
Income disregard to be reduced
As your tax credit claims are based initially on the income of the previous tax year, if your actual earnings increase significantly you may have to repay tax credits you have received. At present as long as the increase in income is less than £25,000 it will be disregarded for tax credit purposes and no repayments will need to be made.
Unfortunately from April 2011 the income disregard of £25,000 is being reduced to £10,000. Claimants with increases in income in excess of £10,000 during the tax year 2011-12 should be aware that they will need to repay part of the credits received in that year if based on income of the previous tax year 2010-11.
Changes to gross awards from April 2011
Please note:The ideas shared with you in this factsheet are intended to inform rather than advise. Taxpayers' circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this tax factsheet, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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