Keep on claiming the credit

Neil Bateman looks at Working Families Tax Credit and
sets out who is eligible to claim.

Working Families Tax Credit (WFTC) is one of the cornerstones of
the government’s welfare to work strategy. It is not just a
rebadging of the old family credit and neither is it a tax
allowance.

We will also see these changes go further with the development
of the Integrated Child Credit to be launched in 2003 – details are
still being worked on and you can expect this to be the flagship in
the government’s war on child poverty.

Despite having been around for almost two years, the levels of
take-up of WFTC remain well below what they should be, and one of
the reasons for this is because many people have no idea that they
might qualify, thinking that it is available only to people in
low-paid jobs.

In particular, self-employed people on low and modest incomes
frequently fail to claim.

WFTC goes so far up the income scale that many Community Care
readers could qualify, not just their clients. And as last June saw
yet another hike in income levels for WFTC, people who in the past
had incomes which were slightly too high may now qualify.

The basic rules on entitlement are pretty straightforward: you
must have at least one child aged under 16 (or under 19 years old
and in full-time education); and you or your partner must work at
least 16 hours a week and you must be in paid work.

Some income is ignored, such as disability living allowance,
plus child benefit and all maintenance. This latter point is a real
boost for lone parents as well as an incentive for liable parents
to pay. There is also the added advantage that a WFTC claim does
not trigger the attentions of the Child Support Agency.

Assuming that someone works for at least 30 hours a week, the
maximum net income levels for children under 16 are:

– One child £270 a week

– Two children £320 a week

– Three children £370 a week

– Four children £411 a week

These income levels will be higher when someone has a child over
16 or a disabled child.

If someone has earnings below these levels, they will qualify.
However, it gets better. The cost of child care is a particular
barrier for people going into work. It is possible to offset most
child care costs for children under 11 up to a maximum of 70 per
cent of £135 for one child and £200 for two or more
children.

For example, a family with two children under 16 could still
receive WFTC if they earned £450 a week (nearly £23,400 a
year – well above what many social workers earn).

The downside of this good news is that a fair proportion of the
gain from WFTC may be lost if someone is on housing or council tax
benefits.

The effect of this poverty trap is particularly marked for
private and housing association tenants whose rents are almost
always well above local authority rent levels.

Some people in the housing world have also suggested that the
withdrawal of housing benefit from people receiving WFTC is
contributing to current levels of rent arrears.

Another point to consider when moving off income support and
into work and WFTC is the loss of free school meals and the cost of
travel to work.

Despite these problems, WFTC is making a real difference to many
people’s lives and many people in work could have an improved
standard of living if they claimed.

A simple online calculator for WFTC is now available on the
Inland Revenue website – www.inlandrevenue.gov.uk/wftc/calc_wftc.htm

There is also disabled persons tax credit. If you think that
WFTC is generous, have a look at how far up the income scale that
goes.