The chancellor announced in his 2015 Autumn Statement that the government will not proceed with certain changes to working tax credits and child tax credits.

All current income thresholds, rates of withdrawal and payment rates will remain unchanged for 2016/17.

The proposed changes that remain are:

  • The reduction in the income disregard from £5,000 to £2,500.
  • The recovery rate for overpayments will increase from 25% to 50% of their awrad, for households with income in excess of £20,000.
  • Tax credits, with the exception of disability benefit are frozen from April 2016.
  • The family element and child benefit for a third child are both removed from April 2017.

Working Tax Credit (WTC)

  • This is paid to employees, or self-employed people, who work at least 16 hours per week.
  • You don't have to have children to qualify.
  • It is made up of a number of elements, including basic, lone parent, disability, and childcare elements. 

Child Tax Credit (CTC)

  • This is paid to individuals who have at least one child.
  • You don't have to be in work to qualify.
  • This is paid in addition to child benefit.
  • It is made up of a number of elements, including standard, disability and family elements.

From April 2016

  • Threshold for WTC claims remains at £6,420.
  • Threshold for CTC claims remains at £16,105.
  • Threshold for combined WTC and CTC claims remains at £6,420.
  • The rate at which tax credits are reduced above these thresholds will be 41p per £1.
  • WTC and CTC will be frozen for four years (except for disability elements).
  • The income disregard (amount which current year income can be higher than the previous year without affecting the tax credit payment) falls from £5,000 to £2,500.

Universal Tax Credit:

  • The WTC and CTC will be rolled into the new Universal Tax Credit (UTC). 
  • Some claimants have been moved to UTC already, with pilots beginning in April 2013.
  • WTC and CTC will continue to be phased out in 2016/17 with most claimants having moved to UTC by the end of 2019.