Working tax credits
This is one of the major components of the tax credit systems in the United Kingdom. This previously was combined with the child tax credit, and was made as a single payment . Basically this is for low income family and single parent . These families enjoyed these credits under the head working family tax credit . This was in existence from April 1999- march 2003 . The family income is the deciding factor for entitlement of tax credit .
Working tax credit may exceed the amount of tax paid by the claimant. There is no hard and fast rule that it should be limited by the tax paid by claimant .
Working tax credit can be claimed by the following people.
1. Working individuals.
2. Childless couples.
3. Working families with dependant children.
4. Who pays for childcare
Both working tax credit and child tax credit are assessed together. The following are the ways for withdrawing the tax credit . The withdrawal rate for working tax credit is thirty seven percent . That means for every pound earned above the fixed income of 5220, any individual is eligible to withdraw 37 pence. This is based on the gross income of individuals. Every salaried people are subjected to three forms of reductions. They are
1. the national insurance contributions (which is currently eleven percent)
2. income tax (twenty two percent)
3. Tax credits. (thirty seven percent)
This makes the effective marginal tax rate of up to seventy percent. This percentage seems to be on the higher side, but this is an inescapable feature and highly beneficial too. Their main purpose is to raise the net salary of low and modest earners . From the next financial year, the government has decided to increase the working tax credits to thirty nine percent.
From the financial year 2008/09, the main withdrawal rate will increase from 37 to 39 percent. At the same time the basic rate of income tax reduces from 22 percent to 20 percent . This leaves the effective marginal rate at 70 percent (11 plus 20 plus 39) . Generally these payments are paid by the government to help those deserved people meet their financial requirements.
Working tax credit can be claimed by phone and post . The revenue department will pay the working credit through direct payment to the claimant respective bank account or building society or post office account . The basic element paid to everyone eligible for tax credit is as follows.(figure are in pounds)
1. Basic working tax credit 1730
2. second adult element 1700
3. single parent element 1700
4. disabled claimant 2310
5. severe disability 980
6. aged people - aged fifty or over and working for the period of benefit
a. if the working hours is between 16 29 hours per week 1185
b. if the working hours are over 30 hours per week 1770
The government has structured many plans for the benefit of its citizens .
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