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HMRC internal manual

Tax Credits Technical Manual

From
HM Revenue & Customs
Updated
, see all updates

Calculation of awards: Determining whether income needs to be taken into account and applying income tapers

Tapering the next entitlement

The Tax Credit (Income Thresholds and Determination of Rates) Regulations 2002, 8 (3) Step 4

The income threshold for the next entitlement is calculated first

In most cases it will be the amount of income already used to taper the previous entitlement to zero. However in some cases the tax credit entitlements may have a minimum income threshold.

Where the entitlement has a minimum income threshold amount, the taper start point will be the greater of

  • The amount of income already used to taper the previous entitlement to zero

And

  • The minimum income threshold

The income threshold for the entitlement can then be compared to the income

  • Where the income is equal to or less than the income threshold for the entitlement, the maximum amounts of this and all the other remaining tax credit entitlements are due in full for that relevant period
  • Where the income is higher than the income threshold for the entitlement the amount of income above the start point is used to taper the value of this entitlement.

See worked example (TCTM07APPX2)