Tax credits

Tax credits are made up of working tax credit (WTC) and child tax credit (CTC). You can claim either or both of them if you meet certain conditions.

WTC is for people who work, whether or not you are responsible for any children. CTC is paid to people who are responsible for children, whether or not you work.

There are special rules in both WTC and CTC for those with disabilities which mean you might be entitled to more money because of your disability. You might also qualify for working tax credit by working fewer hours than those who have no disability.

It is important to understand that you may have a disability but that may not qualify you as disabled for tax credit purposes because there are very specific rules about who qualifies as disabled.

Working tax credit (WTC) is made up of different elements. When HM Revenue & Customs (HMRC) work out how much to pay you, they first have to work out the maximum you can get. This maximum is found by adding together all of the elements you qualify for.

There are two elements that are important for those with disabilities:

Disability element
Severe disability element

The Disability Element

The disability element is significant. If you don’t have children, qualifying for it means you can get Working Tax Credit by working at least 16 hours per week (rather than 30). It may also mean you get more money each week from WTC.

Tax credits are calculated on a daily basis. To get the disability element, you must meet ALL 3 CONDITIONS below for each day of your claim.

CONDITION 1: You must work at least 16 hours a week

The disability element is only for those who are working. If you are part of a couple, and one of you is disabled but not working, you won’t get the disability element included. If you both meet all 3 conditions, you will qualify for two disability elements.

CONDITION 2: Your disability must place you at a disadvantage in getting a job

The meaning of this expression, in tax credit terms, is that you have one of a number of disabilities which HMRC have set out in a list.. You can find that list on leaflet TC956 produced by HMRC. You must meet one of the descriptions on the list to pass this part of the test.

CONDITION 3: You must receive or have previously received a qualifying benefit

A list of disability-related benefits is set out in the law, at least one of which you must be receiving now, or have received at some time in the recent past.

The benefits, and the rules for each, are set out below. You don’t need to meet them all, as long as you meet at least one of the bullet points below, you will satisfy condition 3.

You must have received higher rate short term or long term incapacity benefit, severe disablement allowance, or employment and support allowance (ESA) for at least one day in the previous 182 days. If you qualify because you are receiving (or have received) ESA, there is a further condition. You must have been entitled to either ESA or statutory sick pay for a period of 28 weeks, which must comprise either one continuous period or two or more periods which are linked together.
You must have received, on at least one day in the previous 182 days, the higher pensioner or disability premium in income support, income-based jobseeker's allowance, housing benefit or council tax benefit.
You must currently receive disability living allowance (DLA), attendance allowance (AA). You can also qualify if you currently receive a mobility supplement or constant attendance allowance paid in conjunction with a war pension or industrial injuries disablement benefit. For the disability element only (not the severe disability element) ANY rate of DLA will qualify you. If your DLA, AA, mobility supplement or constant attendance allowance stops your disability element will cease immediately
You must have an invalid carriage or another vehicle provided under the Invalid Vehicle Scheme.
You qualify if you have been entitled to the disability element of WTC itself at any time in the previous 56 days. But if the reason you were entitled to the disability element was that you were getting DLA or AA or under the invalid vehicle scheme, you will not qualify under this head.It is important to be aware that this rule also applies when you renew your tax credit claim as each tax year is counted as a new claim.
You qualify if you have undertaken 'training for work' for at least one day in the previous 56 days, and within 56 days before the first day of training for work you have received either:
- short-term incapacity benefit at the higher rate, or
- long-term incapacity benefit, or
- severe disablement allowance, or
- contributory ESA. Again,you must have been entitled to contributory ESA or to statutory sick pay for a period of 28 weeks, comprising one continuous period or two or more periods which are linked together. If statutory sick pay was payable, you must have satisfied the required contribution conditions.

'Training for work' means training under certain statutory arrangements on a course whose primary purpose is the teaching of occupational or vocational skills. You must attend for at least 16 hours a week.

You can also satisfy condition 3 by qualifying under the ‘fast track’ rules. Although it is called the fast track, it requires you to be off work sick for quite a long time and be in receipt of certain benefits during that time to qualify.

To meet the fast track rules you must meet all 3 numbered points below:

1. Due to your incapacity for work you received statutory sick pay, occupational sick pay, short term lower rate incapacity benefit or income support for at least 140 days and the last of those days fell within the previous 56 days

OR

Due to your incapacity for work or limited capability for work you were credited with class 1 or 2 national insurance contributions for at least 20 weeks where the last of those weeks fell within the previous 56 days.

OR

Due to your limited capability for work you received employment and support allowance for at least 140 days where the last of those days fell within the previous 56 days.

2. You have a disability that is likely to last for at least 6 months, or for the rest of your life if your illness is terminal and you are not expected to survive for six months.

3. Your gross earnings (before tax and national insurance are deducted) have dropped by at least 20% following your disability with a minimum reduction of £15 a week.

In certain circumstances the 140 days (or 20 weeks) can be made up of two periods.

The qualifying benefits test can be confusing. If you are not sure whether you qualify you should seek advice as if you incorrectly tell HMRC you qualify for the disability element you may end up with an overpayment that you will have to pay back.

Claiming the disability element

When you fill in the tax credit claim form, you will be asked to tick a box saying if you are disabled. You should read the TC956, a leaflet explaining the disability element produced by HMRC, carefully and make sure all 3 conditions apply to you before doing so.

The amount you actually get will depend on your household income.

Severe disability element

This element is different to the disability element. You can get this even if you don’t qualify for the disability element. This is because there is no requirement that you must work to get this element, so if you have a partner who doesn’t work but meets the condition below, you will get the severe disability element included.

To qualify you (or your partner) must receive the highest rate care component of disability living allowance OR the higher rate of attendance allowance.

If you get the highest rate care component of disability living allowance, but it is suspended whilst you are in hospital, you will still qualify for the severe disability element.

It is easy to get confused with the different levels of disability living allowance (DLA). There are two parts to DLA – mobility and care.

There are 3 mobility levels: Lower, middle and higher

There are 2 care levels: Middle and higher.

Only the Highest rate of the care part of DLA allows you to receive the severe disability element. If you receive any of the other parts of DLA, even the highest rate of mobility, you will not qualify for this element.

If you are unsure which level of DLA you get, check your award letter from the Department of Work and Pensions or contact the disability benefits helpline.

If you are part of a couple and both of you meet the conditions, you can get two elements included.

Claiming disability related elements

If you are making your first claim for the tax credits, you will asked to tell HMRC whether you qualify for either the disability element or severe disability element (or both) by ticking boxes on the claim form.

If you are already getting tax credits, but think you might now qualify for one of the elements above, you need to ring the tax credit helpline on 0845 300 3900 (textphone 0845 300 3909) as soon as you are awarded your qualifying disability benefit. As long as you tell HMRC within 3 months of your disability benefit being awarded, the tax credit elements should be backdated to the start date of your disability benefit. These backdating rules are complicated and more information can be found in our advisers section.