Any student can apply for the tax credits if they meet the eligibility requirements, and as the tax credits system has now replaced parts of the student support system it is very important that you apply for any tax credits to which you are entitled.

This page contains the following information:

1) Eligibility      
2) Rates and Thresholds   
3) Treatment of Income   
4) Useful sources of Information  

1) Eligibility

 You can claim Child Tax Credit if:
• you are or your partner is responsible for at least one child who is ‘normally living with’ you; and
• you have children who are either under 16, or under 20 in full-time non-advanced education or approved training; and
• you are not subject to immigration control (if you are subject to immigration control, you can still claim as a couple providing your partner is not subject to immigration control); and
• you are present, ordinarily resident and have a right to reside in the UK.

You are able to claim Working Tax Credit if:
• you are 16 or over, have children and are working at least 16 hours a week, or
• you are 16 or over, have a disability and are working at least 16 hours a week; or
• you are over 25 and working 30 hours a week; or
• you are 50 or over, have been claiming Income Support (IS), Jobseekers’ Allowance (JSA) Incapacity Benefit (IB) or certain other benefits for at least 6 months, and are now working more than 16 hours a week; and
• you are not subject to immigration control (though if your partner is not subject to immigration control, you can claim as a couple).
• You also have to be present and ordinarily resident in the UK.

If you are eligible for WTC you may also be able to claim for childcare if:
• you are a single parent, working at least 16 hours a week, and incurring ‘relevant childcare charges’; or
• you are a couple, both working at least 16 hours a week, and incurring ‘relevant childcare charges’; or
• you are a couple, one working at least 16 hours and the other is incapacitated, a hospital in-patient or in prison, and you are incurring ‘relevant childcare charges’.

‘Relevant childcare charges’ means childcare charges paid by one or both of a couple for a child for whom one or both of them is responsible. The child care provider must be registered or approved, the meaning of which is described in the Revenue's leaflet WTC5. 

For tax credit purposes, work done as a student nurse as part of your course does not count as ‘qualifying remunerative work’.

2) Rates and Thresholds

Tax Credits are composed of various elements, which are cumulative. Visit the HMRC website for full details and rates for 2008/09 tax year (6 April 2008 - 5 April 2009).

The childcare element of WTC provides up to 80 per cent of weekly eligible costs incurred by you. Maximum eligible childcare costs are £175 for one child, or £300 for two or more children. The maximum amount payable will be 80 per cent of these eligible cost levels, therefore either £140 per week (80 per cent of £175) or £240 per week (80 per cent of £300). You cannot claim tax credits on childcare costs unless you incur them yourself; therefore, if your childcare is being funded from another source (eg your local authority), you can only claim tax credits on the balance of the costs.

To calculate the maximum rate entitlement, all qualifying elements should be added together. Whether you receive the maximum rate of tax credits or a reduced rate will depend on your income. If you live with a partner, you will be assessed on your joint income. See below for information on how income is calculated.

If you are entitled to claim CTC only, the income threshold is £15,575.  If you are entitled to claim WTC, whether alone or with CTC, the threshold is £6,420.  If your income is below the relevant threshold, you will get the maximum entitlement.  If your income is higher, the amount you receive will be reduced from the maximum by 39p for every £1 you earn above the threshold. 

If you claim after the start of a tax year the amount you receive will be reduced pro-rata to the time that your application was received, but your claim can be backdated for up to three months if you were eligible for all or part of that period.  You do not have to give any reason for late application within these 3 months.

Below are some example calculations:

If your income takes you over the threshold, entitlement is reduced in the following order:
1. Working Tax Credit
2. Childcare Element of WTC
3. Child Tax Credit (but not the family element)

Therefore if you claim WTC, the childcare element of WTC, and CTC, any deductions will be taken from WTC first, then the childcare element of WTC and finally from CTC. Note that the family element of CTC is not reduced until your annual income reaches at least £50,000, and then the £545 family element is reduced at a rate of 6.67%, not 39%.

Once HM Revenue & Customs has assessed your claim they will send you an award notice informing you of the amount you are entitled to and when payment will start. It is very important that you use the checklist provided to check all of the details on your award notice and notify HM Revenue & Customs within one month if you think any details are incorrect.

3) Treatment of Income

The amount of tax credit you are entitled to depends on your income over a tax year.  It is calculated by adding up all income sources and then deducting any disregards that may apply.

Claims will initially be assessed based on the last complete tax year’s income.  Therefore any claims made between 6 April 2008 and 5 April 2009 should initially be assessed on your income in the 2007/08 tax year.

HM Revenue and Customs is able to reassess your entitlement after your initial claim if your income in the tax year in which you are claiming is likely to be less than the previous tax year. In this instance your entitlement will be based on estimated current year income.

HMRC can also reassess your entitlement if you expect your income to rise as compared to the previous tax year. Due to the existence of a generous disregard, an increase of £25,000 or less between your current year income and previous year income may not affect your award (ie it will still be based on your previous year income). However, it is important that HMRC have an up to date income figure so they correctly assess your payments in the first few months of the following tax year, before your renewal papers are processed.

If you expect your current year income to rise by more than £25,000 as compared to your previous year income then you can ask for a reassessment after your initial claim. Your new entitlement will then be based on your estimated current year income less the £25,000 disregard.

Therefore students who were in paid employment prior to becoming students and who believe that this income would reduce or eliminate any tax credit should still claim if their current income would make them eligible. Nevertheless, if your income, having decreased, rises again during the current tax year, the rise could mean you have been paid too much tax credit which will have to be paid back to HM Revenue & Customs. Care should therefore be taken not to overestimate any fall in income.

The majority of student income is fully disregarded in calculating the student’s entitlement. Only some grants and allowances for dependants are included as income, plus elements of the Career Development Loan. 

With regard to student income, the following are classed as income for the purposes of tax credits:

• child dependants’ grant (except the NHS dependants’ grant);
• adult dependants’ grant;
• lone parents’ grant;
• two homes grant; and
• any part of a Career Development Loan paid for living expenses.

With regard to student income, the following are all disregarded:

Higher Education:
• grants or loans for tuition fees;
• maintenance grants;
• Special Support grants;
• Young Students' Bursaries;
• the Higher Education grant
• loans from the Student Loan Company;
• the childcare grant;
• the school meals grant;
• the travel, books and equipment grant;
• the disabled students’ allowance;
• travelling expenses;
• postgraduate studentships from any research council, the British Academy, or the SAAS;
• social work bursaries;
• NHS bursaries, dependants’ allowances and travel expenses;
• Scottish Health Department bursaries;
• Access to Learning Fund grants; and
• hardship grants.

Further Education:
• Education Maintenance Allowances;
• Maintenance bursaries;
• Care to Learn grants;
• Learner Support Fund hardship grants;
• two homes allowance;
• residential bursaries; and
• childcare bursaries.

Other forms of income, including taxable social security benefits, any wages or salary earned either as an employee or whilst self-employed, profits from a business, share dividends or other investment income and pensions are all counted as income when assessing tax credit entitlement.  The first £300 of income from pensions and/or investments is however disregarded.

Non taxable social security benefits (such as Child Benefit, Housing Benefit, Council Tax Benefit, Income Support, Maternity Allowance and Disability Living Allowance) are all disregarded.

There is no section of the form to note student income, so it should be noted in ‘other’. You should only enter that part of student income which is assessable: disregarded income should not appear on the form. Thus, only dependants’ allowances, the lone parent’s grant, the two homes allowance and any part of a Career Development Loan paid for living expenses should be entered as income – all other student income should not be entered in the form. If you are unsure of what to include, ask your students’ union or association or your institution’s student adviser for assistance.

Changes to student support
The child dependants’ grant was abolished for undergraduate students in England and Wales from September 2003, and for Scottish students and students in receipt of social work bursaries from September 2004.  Students should seek support for dependent children through the tax credits system as a result.

Students funded through the NHS student grants unit continue be able to claim both Dependants’ Grants and the Child Tax Credit.

Students who may be worse off
Student parents going abroad as part of their course will not be able to receive the Childcare Grant or funding through Tax Credits.  If you are in this position, you should approach your institution’s Access to Learning Fund to make up this funding.

Social Security benefits
Child Tax Credit also replaced dependent children allowances in Income Support (IS) and Jobseeker’s Allowance (JSA). The child elements of IS and JSA will be gradually transferred to CTC.  From this point claimants of these child allowances will be expected to claim CTC instead.

For students claiming state benefits, including Housing Benefit, tax credits will count as income in calculating entitlement. Students whose CTC is higher than their child Dependant’s Allowance will find that their Housing Benefit will be reduced by 65p in every pound of their income above their HB ‘applicable amount’.

How to find out if you qualify
More information on qualifying for tax credits is available from the HM Revenue and Customs website or from the helplines (see section 5 for contact details).

You can pick up an application form (TC600) from the HM Revenue and Customs Enquiry Centre, Jobcentre Plus, some money advice centres, Citizens Advice Bureaux or institution finance offices. Alternatively contact the tax credits helpline to request a claim form (contact details given below).

4) Useful sources of information

HM Revenue & Customs
Formerly the Inland Revenue.

Low Incomes Tax Reform Group

Tax Credits helpline (England, Scotland and Wales)
Tel: 0845 300 3900  Textphone: 0845 300 3909

Tax Credits helpline (Northern Ireland)
Tel: 0845 603 2000  Textphone: 0845 607 6078

Both helplines are open seven days a week from 8am to 8pm.

Information kindly supplied by Low Incomes and Tax Reform Group 

Whilst care has been taken to ensure that all information was accurate at the time of writing, students are advised to check legislative provision before action.