Many workers have seen 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.
Where someone's wages have dropped because they have been designated a furloughed worker they 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. This is because they will be treated as working their normal hours until the Job Retention Scheme and Self-Employment Income Support Scheme close, and for a further 8 weeks afterwards - even if they are not using either scheme. They do not need to contact HMRC about this change.
While under furlough they will still be treated as working their normal hours during periods of absence from work due to illness or incapacity; childbirth, parental bereavement and adoption.
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.