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19 May 2021

£500 Payment for Working Households on Tax Credits

Frequently Asked Business Question:

My wife and I are working parents and we receive working tax credits. We have read that HMRC was to make a one-off £500 supplementary payment in April for working families. What is this for and what should we do if we haven’t received anything to date?

Top Tip:

In March 2020, as part of the response to the coronavirus pandemic, the Government announced that they would increase the basic element of Working Tax Credit (WTC) for the 2020-21 tax year by an additional £20 a week. The basic element of WTC was originally intended to be £1,995 for the 2020-21 tax year but was increased to £3,040. A similar £20 per week temporary increase was made to universal credit (UC). The increase to WTC (and UC) ended on 5 April 2021.

In the March 2021 Budget, the Government confirmed that they would extend the UC temporary increase of £20 a week until the end of September 2021 – a 6- month extension. However, WTC is not a weekly or monthly benefit like UC, so it is not possible to pay an increase (equivalent to £20 a week in UC) for only 6 months of the tax year for WTC. Instead, the Government announced this one-off payment of £500 which is intended to provide support (equivalent to £20 a week for 6 months) covering the period from 6 April 2021 to 30 September 2021.

You will qualify for the payment if, on 2 March 2021 you had:

  • A current award of working tax credit at an amount higher than Nil; OR
  • A current award of working tax credit of NIL but you received CTC at an amount higher than Nil.

Although there must have been an award of tax credits in place on 2 March that meets one of the bullet points above, you do not need to have actually received a payment of tax credits on that date.

The main thing is that you must have had the working tax credit element(s) included in your award calculation on 2 March and you must have been awarded some WTC or CTC. If your income was high enough to reduce your WTC to nil (if you qualify only for WTC) or WTC and CTC is nil (if you qualify for both) then you will not qualify for the £500 payment. If you had working tax credit elements included in your award and you were awarded some WTC or CTC but those payments were reduced to zero in order to recover an overpayment or to avoid overpaying you for the year, then you will still qualify for the payment.

HMRC say all payments should have been made by 23 April 2021. HMRC sent letters and text messages to people who they thought would qualify for the payment from 19 April. The payment will show in your bank account with the reference ‘HMRC C19 Support’. The £500 payment will not show in the tax credits part of the personal tax account or the HMRC tax credits app. It is not a payment of tax credits.

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If you think you should have received a payment, or if HMRC have told you that you will receive a payment by text or letter and you have not received it by the end of April, you should contact HMRC.

If you qualified for the payment based on your tax credit award but HMRC later find your tax credit award or your entitlement to the payment was fraudulent then you will have to pay a tax charge equivalent to the payment (£500).

The advice in this column is specific to the facts surrounding the questions posed.  Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

Contact Malachy

Malachy McLernon / Director

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