Income Calculation (Info)
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To calculate the income of the claimant, or in the case of a joint claim, the joint income of the claimants for tax credit purposes, carry out the following steps
Step1
Calculate and add together the income of the claimant / partner from the following sources
- Pension income
- Investment income
- Property income
- Foreign income
And
- Notional Income
For more guidance about these sources of income see Income Other Than Earnings.
Note: If the calculated result of this step is £300 or less, the income is treated as nil. If the calculated result is more than £300, only the excess is taken into account
Examples
Mrs S has income from shares (dividends) of £127 per annum (pa). This is below £300. The income is treated as nil
In a different household Mr P has income from property of £700 pa, a pension of £800 pa and income from shares of £230 pa. The total income is £1730. Disregard £300. £1430 is taken into account as income
Step 2
Calculate and add together the claimant’s / partner’s income from the following sources
- Student income
- Miscellaneous income
- Employment income. For more guidance about employment income see Employment Income
- Social Security income
For more guidance about the latter source of income see Income Other Than Earnings.
Step 3
Add together the amounts resulting from the calculations in steps 1 and 2
Step 4
Calculate the trading income (if any) from the claimant / partner’s work as a self-employed earner.
For more guidance about self employment see Self Employed Income.
The earnings from self employment should then be added to the sum of the income at step 3.
Note: If the earnings from self employment carried out on a commercial basis during the year have resulted in a net loss, the amount of that loss should be deducted from the total income at step 3. Follow the guidance in Where The Business Made A Trading Loss
Example
Mr S’s income from employment is £14,300 pa, he has income from investment income of £370, he also has self employed work which has resulted in a net loss of £1380 in the year. His income for tax credits purposes is calculated £14300 + £70 (£370 - £300) = £14370, minus £1380 = £12990
Step 5
The income of the claimant / partner is the amount left after adding together income from all sources and deducting the appropriate amounts.
Note: The above income should be calculated in accordance with the key general rules and after applying the general disregards. For more information see the following
