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The working families tax credit is a tax credit payable to working families depending on their circumstances. The WFTC
- aims to provide a better deal for working families
- has replaced Family Credit
- is administered by the Inland Revenue, and is paid through the pay packet.
Those entitled to the WFTC include families - either couples or lone parents - who
- have one or more children
- work at least 16 hours a week
- are resident in the United Kingdom, and entitled to work here
- have savings of £8,000 or less
WFTC has four parts:
- basic tax credit - £53.15
- 30 hour credit (working over 30 hours) - £11.25
- tax credit for each child; Age - 0 to 15 - £25.60, or 16 to 18 - £26.35
- childcare tax credit - up to 70% of eligible costs up to maximum costs of £100 for one child and £150 for two or more children.
The WFTC award is calculated by adding the credits together.
WFTC award will normally last for 26 weeks.
For illustrative purposes we'll use the year 2000-2001
For instance, a one child family with an annual income before tax of £12 000, would pay £37 less per week in tax for a 26 week period each year.
| Your family Annual Income Before Tax |
Number of children (extra £ each week) |
| |
1 |
2 |
3 |
| £12,000 |
£37 |
£63 |
£88 |
| £14,000 |
£23 |
£48 |
£74 |
| £16,000 |
£08 |
£34 |
£60 |
| £18,000 |
-- |
£20 |
£45 |
| £20,000 |
-- |
£5 |
£31 |
Clearly, the lower the annual family income before tax then the higher is the extra money they receive each week for each child within the house. For instance, a household on £12,000 with 2 children would receive an extra £63.00 per week for the 26 weeks that the WFTC is available. This would equal an extra £1638.00. However, if the household income was higher, then the
family is entitled to less credit. This is an example of means-testing for targeting the welfare payment to the those who need it most.
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