Working Families' Tax Credit (WFTC) is a new benefit from the DSS. It replaced Family Credit on 5 Oc...
Working Families' Tax Credit (WFTC) is a new benefit from the DSS. It replaced Family Credit on 5 October and is aimed at providing financial help for families and lone parents with low and middle incomes.
Who is eligible?
For a family to qualify there must be at least one child under 16, or under 19 if in full-time education up to and including A-level standard. At least one partner must be working 16 hours or more per week. This work can be employed or self-employed.
As with most benefits, the amount payable is dependent on the individual circumstances of each family. The amount paid out under WFTC is also dependent on a number of factors, the key ones being the number of children, the amount of capital and the net earnings per week.
Childcare tax credit
When returning to work it is widely recognised that the cost of childcare can be one of the greatest hindrances, sometimes making it entirely uneconomical. This is especially true for lone parents and those families where the other partner is working. For this reason, childcare tax credit will be included if the claimant qualifies for WFTC and satisfies certain criteria. These are:
l The claimant is a lone parent who works for 16 hours or more per week.
l A couple where both the claimant and their partner are working for 16 hours a week or more.
l A couple where one is working 16 hours or more a week and the other is incapacitated, according to certain conditions.
l Eligible childcare is used - childcare provided by registered childminders, nurseries and out of hours clubs on school premises, run by the school or local authority and childcare schemes run on crown property.
Childcare tax credit will be worth up to 70% of the eligible childcare costs. This means that for a family paying eligible childcare costs of £100, £70 will be included in WFTC. The maximum limits are £100 for one child and £150 for two or more children.
Earnings and capital
The amount of capital held by a family will affect whether they qualify and the amount they are paid. Families with capital over £8,000 will not qualify for the benefit. Capital below £3,000 is not taken into account. For capital between £3,000 and £8,000 a weekly income of £1 is assumed for each £250 of capital above £3,000. For example, if a family has £5,000 of capital they will have £8 added to their weekly income for calculation purposes (£5,000 - £3,000/£250).
If a family's net income exceeds £90 a week, 55 pence of every excess pound is deducted from the maximum WFTC. Net income is earnings (gross pay less tax, NI contributions and half of any pension contributions) and most other forms of income.
Rates
Once awarded, the amount of benefit will usually remain the same, even if there are changes to circumstances, for example, an increase or decrease in wages. However, one change in circumstances that will affect the amount of benefit payable is when the last remaining child leaves full-time non-advanced education. In such cases, WFTC will be terminated from the week after the change. It is the responsibility of the claimant to notify the Inland Revenue of this change.
How is it paid?
Claimants have a choice of payments:
l Direct into a bank or building society every two weeks.
l At a post office every week.
l From April 2000 payments can be made by employers through the wage packet.
WFTC is usually paid for a fixed period of 26 weeks after which the claimant can make another application.
How to claim
The WFTC is administered and paid by the Inland Revenue. Application forms can be obtained by phoning the WFTC helpline on 0845 609 5000. Forms are also available at Benefits Agency Offices or Inland Revenue Offices. Completed forms should be sent to Inland Revenue, PO Box 145, Preston PR1 0GP.
Related benefits
Benefit may also be available for lone parents who are starting work or have been receiving jobseeker's allowance or income support for 26 weeks continuously. From 4 October 1999 this payment, known as lone parent's benefit run-on, can provide an additional two weeks' income support. This is aimed at helping eligible claimants with living expenses until they receive their first pay or while applications for WFTC or disabled person's tax credit are processed.
WFTC will not be affected by the payment of any of the following:
l Attendance allowance.
l Child benefit/child benefit (lone parent).
l Constant attendance allowance.
l Council tax benefit, including extended payment.
l Disability living allowance.
l Housing benefit, including extended payment.
However, WFTC does count as income when housing benefit and council tax benefit are calculated.
Edward Sylvester is marketing assistant at Guardian Financial Services
