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HMRC internal manual

Tax Credits Manual

Miscellaneous (A to B): Award calculation stage 3c - Calculating income adjustments (Info)

The amount of an award will be reduced as family income increases. This is known as ‘tapering’.

To calculate the income adjustments, the following are used

  • taper start point (the level of income above which a particular award or tax credit entitlement will start to be reduced by income)
  • taper rate (the percentage of income above the taper start point which will be used to reduce the maximum amount of an entitlement due).

There are two initial taper start points

  • where the award is for CTC only - follow the guidance in TCM0132420 for the current CTC taper start point
  • where the award includes WTC - follow the guidance in TCM0132420 for the current WTC taper start point.

Note: For earlier years’ rates and taper start points, follow the guidance in TCM0132420.

Each entitlement period in the award period will be considered separately.

The annual income and taper start point amounts will be converted to amounts for each individual entitlement period by dividing the number of days in the tax year of the award and multiplying by the number of days in the entitlement period.

Note: Fractions of a penny are rounded down for the annual income figure and rounded up for the taper start point.

Where income is not to be taken into account for an entitlement period, the maximum amount of tax credit will be due for that period. The next entitlement period should then be considered. Once all entitlement periods have been considered, this stage of the award calculation will be complete.

Where income is to be taken into account for an entitlement period, the income amount for the period will be compared with the initial start point amount for the period.

For more information, follow the guidance in TCM0132260 or TCM0132280, as appropriate.