Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the effect of key workers who are in receipt of tax credits and who are taking on additional hours to support the fight against covid-19 on their tax credit payments going forward.

The Tax Credit system has a degree of flexibility built in, in order to help claimants manage changes in income. The Tax Credit disregard means that the first £2,500 of an increase or decrease in household income, compared with the previous tax year is disregarded. Therefore, carers, NHS staff and other key workers who take on additional hours and experience an increase in income of up to £2,500 per year will see no change in their overall Tax Credit award.

The Government also recognises that Tax Credits were introduced in the early 2000s and no longer fully reflect the world of work for many people. That is why we are introducing Universal Credit.

Universal Credit replaces Tax Credits and other legacy benefits, to provide a single system of means tested support for working age people. Universal Credit is assessed and paid monthly and is based on claimants’ actual earnings in the month, rather than their annual income.