Interaction of WTC and CTC
WTC and CTC are designed to be a seamless allowance that steadily reduces as family income rises.
If they are claimed together, both combine to form the basic award. This combined award is subject to withdrawal from the point at which WTC entitlement would have been zero (called the First threshold for those entitled to Child Tax Credit only). In 2009/10 this threshold was £16,040.
However, unlike WTC, CTC does not continue to reduce to zero. It reduces only until it reaches the "basic family element" of £545pa. Thereafter it remains fixed until the household reaches a second income threshold (£50,000 in 2009/10). After that it reduces again at a rate of £1 for every £15 of income.
Recipient households of combined WTC/CTC awards thus fall into three categories
- those on a 'main-rate' reduction of 70 percent (i.e. marginal tax + 39%) receiving > £545pa
- those on an income of up to £50,000 in receipt of the small flat rate family element (i.e. marginal tax only) receiving £545pa
- those with incomes between £50,000 and £58,170 (i.e. marginal tax + 6.67%) receiving <£545pa
Read more about this topic: Working Tax Credit
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