Why have my tax credits decreased? Explanation of benefit changes and when a one-off payment of £ 500 will be made
If you are receiving a labor tax credit, you may have noticed that your payment has been reduced this month.
Indeed, the temporary increase, which was introduced last April due to the Covid-19 pandemic, has now ended.
The government has increased the basic element of the operational tax credit from £ 1,045 to £ 3,040 from April 6, 2020 to April 5, 2021.
Get financial advice and industry news to help you manage your money
This gave some households a raise of £ 20 per week.
However, this increase has now been dropped and replaced with a one-time payment of £ 500.
Who is eligible for the single payment?
You may be entitled to the £ 500 if, on March 2, 2021, you received:
- Labor tax credit
- Child tax credit, and were eligible for the work tax credit, but you did not receive a payment because your income is too high
If you are eligible, you will receive a text or letter from HMRC in April.
You don’t need to contact HMRC or request payment yourself.
When will I receive my payment?
If you are eligible, your payment must be sent directly to your bank account by April 23. You will not see the payment on the online tax credit service.
The payment is not taxable and will not affect your benefits. You do not need to report it as income for self-assessment tax returns or for tax credit claims and renewals.
If you have changed your bank details, you must notify HMRC by April 8 to ensure payment goes to your new account. You can do it here.
What is the labor tax credit?
The work tax credit is a benefit that you can receive if you already receive the child tax credit and work a certain number of hours per week.
If you’re between 25 and 59, it’s at least 30 hours a week. If you are over 60, disabled or single parent, you must work at least 16 hours per week.
You can read more about the work tax credit here.