Up-rating of working tax credit etc
- The rate of the basic element of working tax credit for the 2020/2021 tax year was set at £1,995, by the Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2020, due to come into force from 6th April 2020. The Act replaces the reference to £1,995 with a reference to the amount of £3,040 for that tax year.
- Section 41 of the Tax Credits Act 2002 requires the Treasury to review each tax year the tax credits rates and thresholds to determine whether they have retained their value in relation to prices in the UK. The basic element of Working Tax Credit, as provided for in regulations made under section 11 of the Tax Credits Act 2002, is subject to review under section 41.
- The Act substitutes a higher amount for the rate of the basic element of Working Tax Credit specified in regulation 20 of, and Schedule 2 to, the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002. The higher amount will apply for the tax year 2020/2021 only.
- The Act enables the basic element of Working Tax Credit to return to the 6th April 2020 baseline rate of £1,995 for the purpose of conducting the Treasury’s review of tax credit rates for the tax year 2021/2022.
- It is also proposed to increase the Universal Credit standard allowance in a separate set of regulations. This Act therefore also enables the amounts of the standard allowance to be the 6th April 2020 baseline rates for the purpose of the review of benefit rates by the Secretary of State for Work and Pensions for the tax year 2021/2022.
