Full-time students and Tax credits

In April 2003, the system of Tax Credits was introduced.  This replaced previous Tax Credits, certain allowances in welfare benefits and the 'dependants grant' for children in the Student Support system.  The Tax Credits have proved to be largely beneficial to those students and their families who are eligible to apply for them. 

The Tax Credits are administered by the H.M. Revenue and Customs. They come in two parts:

  • Child Tax Credit (CTC) and
  • Working Tax Credit (WTC). 

Please select the link that interests you: 

Applying for Tax Credits
Child Tax Credit (CTC)
Working Tax Credit (WTC)
Changes in Circumstance



Applying for Tax Credits

Applications for both CTC and WTC are made on the same form, TC600, available from H.M. Revenue and Customs Enquiry Centres or by telephoning 0800 300 3900.  You can apply online at www.inlandrevenue.gov.uk/taxcredits

The Inland Revenue's helpline is 0845 300 3900 (from 8am to 8pm, 7 days a week).

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Child Tax Credit (CTC)

You qualify for CTC if: 

  • you have at least one dependent child - or young person aged 16-18 who is in full-time non-advanced education or registered with the Connexions service - for whom you are responsible and normally lives with you; and
  • your income is sufficiently low; and
  • you are present and ordinarily resident in the UK; and
  • you are not subject to immigration control.

CTC is made up of a combination of elements.  From April 2011 the annual rates are:

Family Element = £545
Child Element = £2,555
Disability Element = £2,800
Severely Disability Element = £1,130

The Family Element is included once in all assessments.  You receive a Child Element for each child or young person.  The Disability Element is added for each child/young person who receives Disability Living Allowance (DLA) or who is registered blind.  The Severely Disability Element is added for each child/young person who receives the higher rate of the care component of DLA.

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For example:

  • If you have one child your maximum CTC would be £3,100 (£545 + £2,555) from April 2011 to April 2012. 
  • If you have 2 children your maximum CTC would be £5,655 (£545 + £2,555 + £2,555). 
  • If you have one child who receives DLA higher rate of care component your maximum CTC would be £7,230 (£545 + £2,755 + £2,800 + £1,130).

The income of both you and your spouse/partner is taken into account - applications must be joint.  You can receive the maximum CTC if your annual gross income is less than the income threshold figure of £15,860 (from April 2011) - if you are entitled only to CTC and not Working Tax Credit (WTC, see below). It is mainly gross taxable income that is taken into account - such as earnings, a small number of welfare benefits and income from investments, property, etc. 

The only part of full-time student funding that is included as income is the Adult Dependants Grant under the Student Support system; if you receive this grant, however, it is improbable that your assessed family income would reach this income threshold figure. 

If you have taken out a Professional & Career Development Loan to fund your studies, the element for living costs (rather than tuition fees) may be taken into account.  Maintenance and Child Support payments are ignored.

CTC is paid directly into the bank account of the main carer in the household on a weekly or 4-weekly basis.

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Working Tax Credit (WTC)

You qualify for WTC if:

  • you or your partner are in full-time paid work (see below); and
  • your income is sufficiently low; and
  • you are present and ordinarily resident in the UK; and
  • you are not subject to immigration control.

To be in full-time paid work if you:

  • are responsible for a child or qualifying young person you must work at least 16 hours per week; or
  • have a disability that puts you at a disadvantage in getting a job you must work at least 16 hours per week; or
  • are aged at least 25 and work at least 30 hours per week; or
  • are aged 50 or over, have been receiving Income Support, Jobseeker's Allowance or Incapacity Benefit for at least 6 months, and work at least 16 hours per week.

It is not usually advisable for full-time students to work more than 16 hours per week as this can have a detrimental effect on studies.  You may, however, have a spouse/partner who fulfils the above criteria.

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WTC is also made up of a combination of elements.  From April 2011 the annual rates are:

Basic Element = £1,920
Couple/Lone Parent Element = £1,950
Disability Element = £2,650
Severe Disability Element = £1,130
30 Hour Element = £790
50+ Return to Work (16-29 hours) = £1,365
50+ Return to Work (30+ hours) = £2,030
Childcare (up to 70% of) = 1 child (per week) £175, OR 2+ children (per week) £300

The Basic Element is included in every calculation with the Couple/Lone Parent Element added as appropriate.  The Disability Element is included if you or your spouse/partner qualify through the disability route (2 elements are added if both in a couple satisfy the disability criteria); the Severe Disability Element is added if you are in receipt of the higher rate of the care component in DLA or the higher rate of Attendance Allowance.   The 30 Hour Element is included if you or your spouse/partner works at least 30 hours per week, or if you are a couple with responsibility for a child/young person, where one of you works at least 16 hours per week and the total hours you work between you equals 30 or more.  The 50+ Element is included for up to 12 months for those aged 50+ who are returning to work.

The Childcare Element is included in respect of charges for approved childcare for each child to the September following their 15th birthday (or following their 16th birthday if the child is in receipt of DLA or is registered blind).  It is included for lone parents who work at least 16 hours per week or couples if both are working at least 16 hours per week, or one works at least 16 hours and their partner is incapacitated.

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NB
If you are eligible for both the Childcare element of WTC and the Childcare Grant under the Student Support system you must choose  to receive one or the other (you cannot have both!).  As WTC pays up to 70% of actual costs and the Childcare Grant pays up to 85%, in many cases it would be beneficial to choose the latter (seek advice if your actual childcare costs are high).  If you choose to give up your job or reduce your hours of work to less than 16 per week, the Childcare Grant will not be affected.

As with CTC, the elements of WTC to which you are eligible are added up to give a maximum entitlement. 

  • If you are also eligible for CTC, the maximum entitlement to WTC and CTC are added together and then compared to your gross income.  The income threshold figure for those eligible for WTC is £5,220. 
  • If your gross income is less than £6,420 you will be entitled to receive the maximum WTC (and CTC if eligible). 
  • If your income exceeds £6,420, your maximum tax credit is reduced by 41% of the excess income.

For example:

  • If your annual income for tax credits purposes is £10,000, this exceeds the income threshold figure of £6,420 by £3,580.  Forty-one per cent of £3,580 is £1,467.80.  Your tax credits for the year would therefore be your maximum entitlement minus £1,467.80.

When excess income reduces the maximum tax credit entitlement, the tax credit payment will be made up of elements according to a hierarchy to ensure that tax credits in respect of children and childcare are paid before WTC.  So, the elements of WTC not including childcare are taken away first, then the childcare element, then the elements of CTC other than the family element.

(Families with an income of up to £50,000 per year will receive the full family element of CTC.  The family element is reduced by 6.67% on income over £50,000.)

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Changes in Circumstance

Tax credits are calculated on your income from the previous tax year and your entitlement is re-calculated at the end of the current tax year, with adjustments made for the following tax year taking into account any over/underpayments you may have received.  During a tax year, however, you must tell the Inland Revenue if you are no longer in a couple or if you go from being single to part of a couple; and, if you cease to use approved childcare or your childcare costs change by more than £10 per week for 4 weeks in a row, you must inform the Inland Revenue.

To avoid over/underpayments it is useful to inform the Inland Revenue of other relevant changes in circumstances that could affect your entitlement.  For example, changes in your earnings, significant changes in your working hours, or dependent children leaving education.  If you cease to work or reduce your hours of work when you become a full-time student it would be useful to inform the Inland Revenue to have an assessment made on current year income.

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