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HMRC internal manual

Tax Credits Manual

Eligibility - income (calculation): Income calculation (AG)

To calculate the income of the customer and partner for tax credit purposes, consider steps 1 to 6.

Step 1

Calculate and add together the income of the customer and partner from the following sources

  • pension income
  • investment income
  • property income
  • foreign income.

Note: Include foreign income that hasn’t been forwarded to the UK. Disregard foreign income which can’t be forwarded to the UK and is relieved from income tax by virtue of Section 584 of the Income and Corporation Taxes Act 1988.

and

  • notional income.

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Step 2

If the total in Step 1 

  • is £300 or less, treat the income as nil and disregard it.
  • exceeds £300, deduct £300 from the total.

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Step 3

Calculate and add together the customer’s and partner’s income from the following sources

  • student income
  • miscellaneous income
  • employment income
  • Social Security income.

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Step 4

Add together the amounts resulting form the calculations in Step 2 and Step 3.

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Step 5

If the customer or partner is self-employed, calculate the trading income or loss as a self-employed earner.

Note: Self-employment must be carried out on a commercial basis for losses to be allowed.

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Step 6

Add together the amounts resulting from the calculations in Step 4 and Step 5 to determine the income of the customer and partner.

Note: If the earnings from self-employment during the year have resulted in a net loss, the amount of that loss should be deducted from the total income at Step 4.