TCTM07070 - Calculation of entitlement: Tax Credit Income Thresholds

Tax Credit Income Thresholds

Entitlement to tax credits is dependant on income thresholds and tapers.

The Tax Credits (Income Thresholds and Determinations of Rates) Regulations 2002, Reg 3(2)

For people entitled to WTC the threshold is £6,420 a year. People with annual income at or below this threshold will receive the maximum award to which they are entitled.

Those with income above the threshold, will have their maximum award reduced by 39p for every pound of income above the threshold.

The Tax Credits (Income Thresholds and Determinations of Rates) Regulations 2002, Reg 3(3)

For families entitled to CTC only, the income threshold is £16,040.

Those whose income is above the threshold will have their maximum awards reduced by 39p for every pound of income above the threshold.

The Tax Credits (Income Thresholds and Determinations of Rates) Regulations 2002, Reg 3(3) & Reg 8(step 4)

For families entitled to CTC and WTC, the income threshold for the relevant period is that amount; or

if greater, the lowest amount of income for the relevant period (found under step 3) which, (disregarding a nil to £26.00 pa award) would result in determining the reduction of the elements of the tax credit (but not the family element) to nil for that period.

The Tax Credits (Income Thresholds and Determinations of Rates) Regulations 2002, Reg 8(3) Step 8, 9 and 10

The family element of the child tax credit is retained until income exceeds a second threshold of £50,000 a year, at which point the family element is tapered away at a rate of £1 for every £15 in excess of £50,000.

Note:

In a small number of cases a family's maximum amount of tax credit will be so high that the child element of the child tax credit will not have tapered away completely by the time income has reached £50,000. In cases like these, the child element will continue to be tapered away at a rate of 39% until it is exhausted. The family element will then be tapered away at the rate of £1 for every £15 of excess income.