Sick, self-isolating or shielding?
Any Child Tax Credit will be unaffected.
Entitlement to Working Tax Credit normally depends on the claimant working a certain number of hours – see here.
However, when the claimant is off work sick, WTC can normally continue for up to 28 weeks. Claimants are still classed as working their normal hours if:
- They are getting Statutory Sick Pay from their employer
- They are getting New Style ESA
- They are getting National Insurance credits because they have a limited capability for work
- They are self-employed but, had then been an employee, they would be entitled to SSP or NS-ESA.
Will Tax Credits increase if earnings drop?
Employees who are sick or self-isolating might see their wages drop from their normal wage to Statutory Sick Pay. Or, if their earnings have been too low for them to qualify for SSP, they might possibly qualify for New Style ESA instead.
Self-employed people might have no earnings for the period whilst off work sick.
Working Tax Credit can continue to be paid for up to 28 weeks, however, it is unlikely to increase.
The Tax Credit award can only be increased if the claimant’s annual income reduces by £2,500 or more, so unless there are other changes in income, the Tax Credits would not normally increase to take account of the drop in earnings as the period of self-isolation should only be for a few weeks.
So should I claim Universal Credit instead?
If you are getting Tax Credit and make a claim for Universal Credit, your Tax Credit award will end.
Universal Credit is assessed differently to Tax Credits, so whilst it may mean that you receive a larger payment of UC now, when you are back at work the UC award may drop - and fall below what you have been receiving in Tax Credit or Tax Credits and Housing Benefit.
It is best to speak to a Benefits Adviser before you make a claim for UC to make sure that this is your best option..
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 sickness 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.
NOTE: HMRC has announced that people temporarily working reduced (or no) hours due to coronavirus, or who are being furloughed, will not have their Tax Credits payments affected if 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.