Working Tax Credit and Child Tax Credit

WTC and CTC were jointly administered by HMRC (and historically DWP-routed on legacy migrations). PolicyEngine UK groups them under gov.dwp.tax_credits because the means-test logic is shared. The combined household award is the variable tax_credits, which sums the two with a minimum-payment floor:

amount = wtc_pre_minimum + ctc_pre_minimum
tax_credits = where(amount < min_benefit, 0, amount)

Parameters live in policyengine_uk/parameters/gov/dwp/tax_credits/ and the formulas in policyengine_uk/variables/gov/dwp/.

Working Tax Credit (WTC)¶

WTC was paid to working-age adults whose hours and income met the eligibility test. PolicyEngine computes it via wtc_entitlement, which is the maximum WTC amount minus the shared tax_credits_reduction from the means test, gated by the would_claim_WTC take-up input.

Elements (gov.dwp.tax_credits.working_tax_credit.elements)¶

Hours test¶

The min_hours tree (min_hours/default.yaml, lower.yaml, old_age.yaml, couple_with_children.yaml) encodes the bands that gate WTC eligibility — typically 30 hours/week for adults with no kids, 16 for lone parents, with a lower band for workers aged 60 or over.

For the joint-claim rules from 6 April 2012, an individual’s own age or disability must qualify that individual’s hours. Two childless workers cannot pool 15 hours each to meet the ordinary 30-hour route, and a nonworking partner cannot lend their age or disability to the worker. Parents can combine 24 hours, with at least one claimant working 16 hours. Hours worked by a child or other dependant do not count towards that total. The min_age and min_age_without_children_or_disability parameters provide the 16-year and 25-year thresholds; the existing min_hours.old_age parameter provides 60. Native annual formula selection retains the earlier formula for a year whose start precedes 6 April 2012; this change does not certify all earlier rules.

is_disabled_for_benefits remains a generic proxy for the statutory disabled worker conditions. For parents, the model also retains its existing proxy for an exception based on the other partner’s disability. These flags do not encode all regulation 9 or regulation 13 tests, incapacity, hospital or prison status, carer’s allowances, or the expected four-week and paid-work conditions. The reported-award, migration, take-up and scheme-closure rules remain separate.

Child Tax Credit (CTC)¶

CTC supported families with children regardless of whether anyone in the benunit worked. PolicyEngine computes it via ctc_entitlement, gated by would_claim_CTC.

Elements (gov.dwp.tax_credits.child_tax_credit.elements)¶

Family element birth-date condition¶

From 6 April 2017, the family element is included only if a claimant or joint claimant is responsible for a qualifying child or qualifying young person born strictly before 6 April 2017. A child born on that date does not qualify. One qualifying child is enough for the single family amount; an older adult or an excluded child cannot unlock it. The model uses its existing CTC child/QYP responsibility mask, including its existing looked-after-child and own-right-benefit approximations.

CTC_family_element applies this condition separately from the individual child element’s two-child limit. Its activation and cutoff parameters live under child_tax_credit/eligibility/; reforming them does not change the individual-element cutoff. The existing flat £545 amount is unchanged. Before the condition applies, supported model years retain the prior flat family amount. The false activation value at 2015-01-01 anchors model coverage, rather than statutory commencement. Annual parameters use the existing April sampling convention; this is not a part-year award model.

The rule reuses birth_day: a supplied valid date_of_birth must agree with legal age on 6 October. A missing or zero date uses the existing annual age and months-since-birthday fallback; birth_year is not a replacement. Those conventions are not exact birth-date observations. Explicit family-element and final-amount inputs retain the ordinary model override contract and are not evidence of legal entitlement. Continuing claims, income tests, minimum awards, other elements and 2025 closure are unchanged; this update does not audit daily statutory award rounding.

Historical coverage remains incomplete: this change addresses the supported 2015+ birth-date rule only. The pre-2011 baby addition and 2003–2014 coverage remain follow-up work under issue #2050; no raw historical values or annual-conversion rules were extended.

Two-child limit¶

Since April 2017 the child element has been restricted to the first two qualifying children. The child_count parameter under child_tax_credit/limit/ encodes this, and born_before (6 April 2017, Tax Credits Act 2002 s.9(3A)) sets which children it applies to: those born before it are exempt, compared on date_of_birth. A few specific exceptions (non-consensual conception, multiple births, kinship care) also apply in law but are not modelled; gov/contrib/two_child_limit/ holds reform options such as an age-based exemption.

Qualifying child tests¶

A child counts towards CTC if they are under 16, or under 20 and in approved education or training and meet the qualifying-young-person conditions. These tests are exposed as a family of *_for_child_tax_credit variables (is_child_for_child_tax_credit, meets_qualifying_young_person_*_for_child_tax_credit).

Shared means test¶

WTC and CTC share a single income test in gov.dwp.tax_credits.means_test:

threshold = ctc_only ? income_threshold_CTC_only : income_threshold
overage = max(0, tax_credits_applicable_income - threshold)
reduction = overage * income_reduction_rate

tax_credits_applicable_income is the benunit’s total income net of specific disregards (pension contributions, certain benefits). The non-earned disregard for unearned income is the means_test/non_earned_disregard.yaml parameter. Awards below min_benefit (a £26-ish floor) are paid as zero.

Scheme end¶

From 2025-04-06 onwards the tax_credits variable returns zero unconditionally — the active parameter flips off and the formula short-circuits with an empty array. The remaining caseload was migrated to Universal Credit via the DWP/HMRC managed-migration programme finalised on 5 April 2025.

The reported variables (working_tax_credit_reported, child_tax_credit_reported) remain available for historical analysis, and the take-up flags (would_claim_WTC, would_claim_CTC) continue to be populated stochastically when the dataset is built so historical years still match published caseload aggregates.

References¶

• Tax Credits Act 2002 — primary statute.

• The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 (SI 2002/2005).

• The Child Tax Credit Regulations 2002 (SI 2002/2007).

• HMRC, Tax credits have ended — official end-of-scheme announcement.

• House of Commons Library, Completing Universal Credit rollout (CBP-9984) — managed-migration timeline.

• HMRC, Child and Working Tax Credit statistics — caseload and expenditure outturns used for calibration.