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Wednesday, 3 October 2023

Money, tax and benefits

Income from employment - work it out for your tax credits claim

When the Tax Credit Office first works out your tax credits they look at your income for the last tax year. A tax year runs from 6 April one year to 5 April the next.

How to work out your income

This is a three-step process:

step 1: look at how much money came in
step 2: find out what you need to take off this
step 3: then what did you have left?

For help working out your income, use the worksheet in the notes that came with your tax credits claim form or renewal pack.

Download 'Getting your tax credits claim form right' (PDF, 3.1MB) Opens new window

Download 'Renewing your tax credits - Getting it right' (PDF, 878K) Opens new window

Help with PDF files

Step 1: how much money came in

First take your total wages from all jobs that you had in the last tax year, before any tax and National Insurance was taken off. This is known as your gross pay. If you’ve had certain ‘employee benefits’ you’ll need to add these in, and there are other things to include such as tips or strike pay. The sections just below tell you what you need to include.

Where to find details of your gross pay

Your employer should have given you a record of your gross pay. This will be a P60, or P45 if you left before the end of the tax year. If you had only one job in the last year, use either of the following:

the amount labelled ‘Total for the year’ - if you've had a P60
the amount labelled ‘Total pay to date’ - if you've had a P45

These forms include any Statutory Sick, Maternity, Paternity or Adoption Pay you got in the year - included in your total pay.

If you didn't get a P60 or P45, check your final payslip, which should show your total pay to date.

If you had more than one job in the year, add up the totals on the forms to work out your total gross pay.

You must also include any money you were paid from working outside the UK. You need to enter the amount in British pounds, not the foreign currency. To work this out, use the average exchange rate for the year your income relates to. So, if your income relates to 6 April 2023 to 5 April 2012, use the average exchange rate for the year ended 31 March 2012.

Check foreign exchange rates Opens new window

Employee benefits

You'll also need to include certain benefits that you got from your employer that were taxed. For example, goods your employer gave you, bills they paid for you or a company car. Your employer should give you a P11D or P9D form at the end of the tax year which will show the taxable value.

Employer benefits - work them out for your tax credits claim

What else to include

As well as your total pay, you need to add:

tips - if they were not included in your taxable pay
money you got because your job ended or changed, and which was taxed
strike pay from your trade union
money you made from stocks and shares that you got from your employment
payments for any work you did whilst serving a sentence in prison or on remand

You don't need to show any tax credits from last year, or any New Deal 50 plus Employment Credits you got.

Step 2: what you need to take off this

To work out what to take off your gross pay, add up any of the following that apply to you, to get a total amount:

Add up these amounts	Things to be aware of
The total amount of Statutory Maternity, Paternity or Adoption Pay you’ve been paid.	Don't include more than £100 for any particular week. For example if you received £80 each week, add up all the amounts of £80 you received. If you received more than £100 for a week, only include £100 for that week.
Work expenses you had to pay in doing your job - which related only to doing your job, and are deductible for Income Tax purposes.	Don't include expenses if your employer reimbursed them. Include travel costs, but not the cost of getting to and from work.
Payments you made that are deductible for Income Tax purposes. For example: fees and subscriptions to professional bodies or societies employee liabilities and indemnity insurance premiums agency fees if you're an entertainer	Don't include these payments if your employer reimbursed them.
Flat-rate expenses, agreed by your employer and HM Revenue & Customs (HMRC), to maintain or renew: tools that are necessary to do your job special clothes that are necessary to do your job - for example a uniform	You will find the amount of allowable expenses on your P2 Coding Notice.
The gross (or grossed-up) amount of what you paid into a pension scheme registered with HMRC. This includes a stakeholder pension and any Free-Standing Additional Voluntary Contributions.	Don't include anything you paid into an 'occupational pension' scheme. This is where your employer took the pension contributions from your pay before deducting tax. Follow the link to the working sheet below for how to work out your gross payments.
The gross (or grossed-up) amount of any donations to charity you made using Gift Aid.	Follow the link to the working sheet below for how to work out your gross donations.

Download 'Tax credit relief working sheet' (PDF, 1.4MB) Opens new window

Help with PDF files

Step 3: what did you have left?

Take the Step 2 total from the Step 1 total to show your total income. Put this on your tax credits claim form or Annual Declaration form in the 'earnings as an employee from all jobs' box. This is in the section on income.

Contact details for the Tax Credit Helpline

Changes in income and tax credits

Tell the Tax Credit Office about changes in the money you get

You need to tell the Tax Credit Office straight away if you expect to have more or less money coming in this year. This is so that they can make sure you don't get too much or too little in the way of tax credits. You can do this by calling the Tax Credit Helpline.