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Coronavirus: Tax Credits - Furloughed Worker
Tax Credits - Furloughed Worker

Many workers are seeing a drop in their wages because their employer has 'furloughed'  them through the Job Retention Scheme.

Working Tax Credit
Entitlement to Working Tax Credit normally depends on the claimant normally working a certain number of hours – 
see here.

However...
Where someone's wages have dropped because they have been designated a furloughed worker will be treated as if they are working their normal hours. 

HMRC has announced that people temporarily working reduced (or no) hours due to coronavirus, or who are being furloughed, will not see a change in their Tax Credit payments - so long as they are still employed or self-employed - as they will be treated as working their normal hours until the Job Retention Scheme and Self-Employment Income Support Scheme close, even if they are not using either scheme. They do not need to contact HMRC about this change. 

What about Child Tax Credit?
Child Tax Credit is not dependent upon hours worked. So someone whose income has dropped can stay on Child Tax Credit.


Will Tax Credits increase if earnings drop?

If the claimant remains entitled to Working Tax Credit then their award can only be increased if the claimant’s annual income reduces by £2,500 or more, so unless their income has dropped by this much or there are other changes in income, the Tax Credits would not normally increase to take account of the drop in earnings. 

What about paying the rent?

Anyone who already gets some Housing Benefit should let the HB Office know about the drop in income, as their HB should increase due to the drop in earnings.

Tax Credit claimants who are not already on Housing Benefit will not be able to make a new claim for HB. Instead, if someone is struggling to pay their rent, they might think about Universal Credit. But note that once on UC, Tax Credits will end. Some people are worse off financially on UC. So, they should speak to a benefits adviser to get a better off calculation. 

If the time off work is just a couple of weeks, it might not be worth swapping to UC. But if the period is longer – they will need to work out what is the best option for their particular circumstances. It is best to seek specialist benefits advice.

Frequently Asked Questions
I currently work part time (16 hrs pw) and care for my severely disabled son who receives DLA high rate care. I do get some Housing Benefit and Tax Credits, but my employers have said there is no work at the moment, so I am staying at home, but I’m not self-isolating – do I have to claim Universal Credit? 

No, you don’t have to claim Universal Credit, although this could be an option.

If your employer is unable to give you any work at the moment but is keeping you on their payroll then they may decide to furlough you. They would then be entitled to receive a grant that will mean they can pay you at least 80% of your normal wages or £2,500 gross a month (whichever is the lower). At the moment you can stay on your Working Tax Credit – even though you are not actually working due to being furloughed.

You can request HMRC to reassess your Tax Credits but whether they are able to do so or not depends on whether your earnings in any tax year are dropping more than £2,500 or not.

So, you could choose to claim UC. This would mean your Tax Credits and HB awards would stop. You would have to wait around 5 weeks until you got your first UC payment – although you could request an Advance Payment.

If you are spending 35 hours or more a week caring for your son then your UC award would include a Carer Element, and this could continue when you start back at work regardless of your hours or pay.
There’s a lot to consider here – including the additions for your disabled son, and potential deductions (more debt deductions can be taken from your UC than from Tax Credits and/or HB). So you are best contacting a Benefits Adviser and getting a calculation done to see which situation would be better for you now and in the long term.

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