Tax Credits Act 2002 section 7

Income test

Section 7 establishes the income test that determines whether a person or couple is entitled to a tax credit, and defines how "relevant income" is calculated by comparing current and previous year income.

• Entitlement to a tax credit depends on the claimant's relevant income either not exceeding a prescribed income threshold, or exceeding it by only enough that a positive rate of tax credit still results after the tapering calculation
• The income test does not apply where the claimant (or either member of a couple) is receiving a prescribed social security benefit — in that case, entitlement is automatic regardless of income
• Relevant income is determined by comparing current year income with previous year income, with a prescribed disregard applied to income rises and falls between the two years so that small fluctuations do not affect entitlement
• HMRC may estimate a claimant's income for the purpose of making, amending or terminating an award, but any such estimate does not change the rate at which the claimant is actually entitled to the tax credit

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