How to work out your income for tax credit claims and renewals
When you claim tax credits, you’ll need to give details of your total income. You’ll also need to work out your income when you renew your tax credits each year.
Usually, what you’re entitled to is based on your income for the last tax year (6 April one year to 5 April the next).
Your income includes:
wages as an employee, including any ‘employer benefits’ you might have had
other income, like interest on savings or pensions
money from state benefits unless they’re ‘tax free’ benefits
money from employment including if you cannot work your normal hours but you’re still getting paid (‘on furlough’)
your profits and earnings if you’re self-employed
some payments relating to coronavirus (COVID-19) that you may have received
Do not include income from:
any Test and Trace Support Payment you got because you needed to self-isolate due to coronavirus
the one-off £500 payment for working households receiving tax credits
This guide tells you how to work out your wages, self-employment income and other income.
Income from employment
There are 3 steps to working out your total income.
Step 1: work out your gross pay
This is your total wages from all jobs you had in the last tax year, before any tax and National Insurance deductions. If you have had certain employee benefits you’ll need to add these in, as well as any tips or strike pay.
Your employer should have given you a record of your gross pay on a P60 or P45 if you left before the end of the tax year. If you do not have a P60 or P45, check your final payslip, which should show your total pay to date.
Add up any of the following that apply to you, to get your total gross pay.
Add up these amounts Notes
Total wages Do not take off tax or National Insurance.
Employee benefits For example, company car or goods they gave you.
Tips Do not include if they are already in your taxable pay.
Money you got because your job ended or changed Only include what you got that was more than £30,000.
Strike pay from your trade union None.
Money you made from stocks and shares that you got from your employment None.
Payments for any work you did whilst in prison None.
Earnings from outside the UK This must be in British pounds, to work this out, use the average exchange rate for the last tax year. This will be the average exchange rate for the year to 31 March. You can use HMRC exchange rate tables.
Step 2: what to take off your gross pay
To work out what to take off your gross pay, add up any of the following that apply to you, to get a total amount:
Add up these amounts Notes
Statutory Maternity, Paternity or Adoption Pay If you received more than £100 for a week, only include £100 for that week.
Work expenses which related only to doing your job (do not include the cost of getting to and from work) Do not include if your employer reimbursed them.
Fees and subscriptions to professional bodies or societies Do not include if your employer reimbursed them.
Employee liabilities and indemnity insurance premiums Do not include if your employer reimbursed them.
Agency fees if you’re an entertainer Do not include if your employer reimbursed them.
The maintenance cost of tools for your job Only if agreed by your employer and HMRC – you’ll find the allowable amount on your P2 Coding Notice.
Special clothes that are necessary to do your job – for example a uniform Only if agreed by your employer and HMRC – you’ll find the allowable amount on your P2 Coding Notice.
Any pension contributions made to a registered scheme not paid through an employer
Any pension contributions made to a registered scheme paid through an employer out of your net income, for example after tax and national insurance has been paid Include any tax relief due, there is a working sheet you can use to work out your pension contributions. For advice on tax relief due contact your pension provider
Include any tax relief due, there is a working sheet you can use to work out your pension contributions. For advice on tax relief due contact your pension provider.
Donations to charity you made using Gift Aid Include the gross amount, there’s a working sheet you can use to work out your pension contributions or Gift Aid.
Step 3: what you have left
Take the step 2 total from the step 1 total to get your total income.
This figure is your ‘earnings as an employee from all jobs’.
When you work out your gross pay as an employee, you need to include the taxable value of certain benefits you received from your employer.
Your employer will give you a P11D form which will tell you the taxable value of any benefits you received.
Form P9D and the £8,500 earnings limit were abolished from 6 April 2016. Form P9D only relates to tax year 2015 to 2016 and earlier.
Add up any of the following that apply to you, to work out what to include in your gross pay.
Add up these amounts Where to find the amount on your P11D
Mileage allowance payments over the tax free approved amount Section E of your P11D.
Running costs your employer has paid for Section E or included in section N in your P11D.
A company car Section F of your P11D (box 9).
Car fuel Section F of your P11D (box 10.)
Expenses payments made to you unless they were business expenses Section J, M or N of your P11D.
Goods and assets your employer has given to you, for example gifts of food and drink Section A of your P11D.
Payments made by your employer on your behalf, for example if your employer paid your rent Section B of your P11D.
Vouchers or credit tokens, for example company credit cards – do not include the cash equivalent of childcare vouchers Section C of your P11D.
For help calculating the value of your benefits, use the worksheet in the guidance notes that came with your renewal pack. You can contact the tax credit helpline.
Income from self-employment
There are 3 steps to working out your income from self-employment.
Step 1: work out your profit
Your profit is what you gave on your Self Assessment tax return for the last tax year. If you had more than one business, add up all of the separate business profits.
If you have not filled in your tax return, you’ll need to estimate your profit.
What else to include
Make sure your profit includes other income or profits your business received, for example rental income from a flat above a shop. Do not include this as ‘other income’ too.
Include any profit from working outside the UK, in British pounds. To work this out, use the average exchange rate for the last tax year. This will be the average exchange rate for the year to 31 March. Use HMRC exchange rate tables.
You can get help with working out your profit by contacing the Self Assessment helpline.
Step 2: what to take off your profit
To work out what to take off your profit, add up:
the gross amount of any personal pension payments
any trading losses from the same business you brought forward from a previous year
the gross amount of any donations to charity using Gift Aid
There’s a working sheet you can use to work out your pension contributions, Gift Aid or trading losses.
Step 3: what you have left
Take the step 2 total from the step 1 total, to get your income from self-employment.
If you made a loss, your ‘income from self-employment’ for tax credit purposes is 0.
You may offset any losses that you have made in this year only, against any other household income for this year.
If you’ve just started out and your business had no income in the last tax year, leave ‘income from self-employment’ blank.
If you received a coronavirus-related payment shown below you must include it in your income for your tax credit claims or renewal. The list is in alphabetical order.
Contact HMRC if you’re not sure if you should include a coronavirus payment you’ve received.
Bonus payment for health and social care staff (Scotland only)
A one-off payment made to all NHS and social care workers in Scotland.
Childminding Business Sustainability Fund (Scotland only)
A £750 grant made available to all childminding services registered with the Care Inspectorate as of 1 February 2021.
Only include the payment if it forms part of your trading income for tax credits.
Coronavirus Job Retention Scheme
A scheme to protect jobs and provide wage support to furloughed employees.
Include payments you’ve received in your earnings from your employer if you’re an employee.
If you’re an employer, only include the payment if it forms part of your trading income for tax credits.
COVID-19 Statutory Sick Pay Enhancement Scheme (Wales only)
Payments made to social care staff working in care homes, domiciliary care and as personal assistants in Wales.
Eat Out to Help Out Scheme
A scheme that encouraged people to eat in restaurants or other eating establishments, by giving them a discount which restaurants can then claim back from the government.
Include the total amount you were repaid by the government if the repayment forms part of your trading income for tax credits.
Fishing industry support schemes established between 6 April 2020 and 5 April 2021
Payments from any scheme that has been set up in the UK where coronavirus has impacted the fishing industry.
Only include the payment if it forms part of your trading income for tax credits.
Limited Company Directors Support Scheme (Northern Ireland only)
Payments to give financial support to company directors in Northern Ireland who have personally been impacted by coronavirus.
Mobile Close Contact Service Provider Support Fund (Scotland only)
A new scheme which pays a one-off £4,000 grant to mobile close contact service providers (such as mobile hairdressers, mobile barbers and driving instructors).
Newly Self-Employed Hardship Fund (Scotland only)
A one-off £4,000 payment to newly self-employed Scottish residents who do not qualify for the Self-Employment Income Support Scheme grant.
Newly Self-Employed Support Scheme (Northern Ireland only)
Financial support to newly self-employed individuals (sole traders and those in partnerships) who have been impacted by coronavirus.
Retail, Hospitality and Leisure Grant
A grant paid to self-employed businesses in the retail, hospitality and leisure industry.
Self-Employed Income Support Scheme
A scheme to provide financial support to those who have been impacted by coronavirus and are self-employed or a member of a partnership.
Small Business Grants Fund
A grant for self-employed businesses that qualify for small business rate relief (and would usually pay business rates).
Special or bonus payment (Wales only)
A one-off special or bonus payment made to NHS and social care staff in Wales.
Staﬀ Recognition Payment (Northern Ireland only)
A one-off payment made to health and social care workers in Northern Ireland.
Taxi driver grant (Scotland only)
A £1,500 grant for private hire and taxi drivers in Scotland.
As well as what you earn from work, you’ll need to work out the total amount of any other income you’ve had. In most cases, you’ll only need to include what you’ve had that was more than £300.
Income to include over £300
Add up the full amount of the following types of other income, then take off £300.
Income from dividends
Include any UK company dividends you’ve received. Also add in the tax credit – shown on the dividend voucher supplied by the company. This could include:
gross amount of dividend income from company shares, authorised unit trusts and open ended investment companies – the amount to include is the total before tax
stock or scrip dividends where shareholders receive shares instead of a cash dividend – the amount to include is the total before tax
Exclude any capital gains exempt from tax.
Saving and investment income
Include the amount before tax is taken off. Do not include interest from tax-exempt investments like Individual Savings Accounts. This could include:
gross interest from banks and building societies and other deposit takers in the UK
interest from National Savings accounts
chargeable event gains, if for instance your life insurance policy matures in year – the amount of the gain will be shown on the certificate issued by your insurer
Include income from property in the UK that you own or rent. This could include:
profit from renting or leasing out land and property (if your rental property made a loss, you can use working sheet TC825 to help you work out what to enter)
Rent-a-Room Scheme income above £7,500 or £3,750 if you’re a joint owner
Widowed Mother’s Allowance
Widowed Parent’s Allowance
Industrial Death Benefit
Do not include the Christmas bonus, winter fuel payment, or war pensions.
Occupational or personal pensions
Include the full amount before any tax was deducted. You can find this on your P60 or other certificates of pension paid.
Also include any annuity payments from a pension scheme.
If your pension includes an extra amount for a work-related illness or injury, contact the tax credit helpline.
Income from trusts, settlements and estates
You can get the figure from form R185 that the trustees or administrators will have given you. Include the amount before any tax was taken off (add together the ‘net’ amounts and ‘tax paid’ or ‘tax credit’ amounts).
income from investments and property overseas
social security payments from abroad
Include the gross amount, before any tax, whether or not it came into the UK.
You should include any foreign income in British pounds. You can take off any banking charge or commission paid when converting foreign currency.
To convert foreign income into British pounds, use the average exchange rate for the last tax year. This will be the average exchange rate for the year to 31 March. You can use HMRC exchange rate tables.
If you need any help, you can contact the tax credit helpline.
Notional income is income that you’re treated as having which you may not in fact have.
Trust income that under Income Tax rules is treated as the income of another person For example, investment income of a child where you’ve provided trust funds of more than £100.
Income you did not take, so you could get tax credits or more tax credits None.
Income that you were entitled to, but did not apply for For example, a taxable social security benefit.
Employment income you could have had For example, because you worked for free, or for less than the going rate.
Capital that’s treated as income For example, if you hold shares in a UK company, and they gave you new shares (a ‘stock dividend’) instead of a cash dividend.
For help working out notional income, you can contact the tax credit helpline.
Income to include in full
You should include the following income amounts in full (do not deduct £300):
Adult Dependants’ Grant paid to students with a partner or a dependent adult
dependants’ grants for students in Scotland
taxable miscellaneous income, for example copyright royalties paid to you for a book when you’re not a professional author
What not to include
Do not include:
maintenance payments received from a former partner
tax credits payments
student grants, except the Adult Dependants’ Grant or any dependants’ grant in Scotland
income your children have had, unless it’s taxable in your or your partner’s name
any payments received through a disguised remuneration or loan charge scheme
Working out your total other income
To get the final figure:
add up all the amounts to include over £300 – add up the full amounts, then take £300 away
then add in all the amounts to include in full
If you end up with a minus figure, your ‘other income’ for tax credit purposes is 0.
For help working out your other income, you can either:
use the worksheet in the guidance notes that came with your renewal pack
contact the tax credit helpline