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HMRC internal manual

Tax Credits Technical Manual

From
HM Revenue & Customs
Updated
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Income: General Deductions

Calculation of income of claimant

The Tax Credits (Definition & Calculation of Income) Regulations 2002, Reg. 3 (1)

The manner in which income of a claimant or, in the case of a joint claim, the aggregate income of the claimants is to be calculated for a tax year for the purposes of Part 1 of the Act is as follows.

Step One 

Calculate and then add together

the pension income (see TCTM04300)

the investment income (see TCTM04500),

the property income (see TCTM04006),

the foreign income (see TCTM04007) and

the notional income (see TCTM04800)

of the claimant, or, in the case of a joint claim, of the claimants.

If the resulting total amount of step one is £300 or less, it is treated as nil.

If the resulting total amount of step one is more than £300, only the excess is taken into account in the following steps.

Step Two 

Calculate and then add together

the employment income (see TCTM04100 and TCTM04200),

the social security income (see TCTM04400),

the student income (see TCTM04005) and

the miscellaneous income (see TCTM04008)

of the claimant, or in the case of a joint claim, of the claimants.

Step Three 

Add together the resulting total amounts of Steps One and Two.

Step Four 

Calculate the trading income (see TCTM04004) of the claimant, or in the case of a joint claim, of the claimants.

If the resulting total amount of this step is a trading profit add the figure to the total amount produced by Step Three.

Where the trade is carried on upon a commercial basis and there has been a trading loss in the year, subtract the amount of that loss from the total amount of Step Three.

Any trading loss in the year which is not set off as a result of the calculation in Steps 1 to 4 above due to an insufficiency of income may be carried forward and set off against trading income of the same trade, profession or vocation in subsequent years, taking earlier years first. This treatment differs to the treatment allowable for Income Tax.

Subject to the allowable general deductions from income (see TCTM04003) the result of these steps is the total household income.