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Background

These statistics provide a breakdown of payments made for tax credit claims based on finalised data. This is a supplementary publication following the Finalised Annual Awards publications released in July 2022 for tax year 2020 to 2021, following award finalisation.

The rate of decline in the number of families receiving tax credits increased in 2020 to 2021, largely due to the roll out of Universal Credit.

Generally, the decreases observed between 2020 to 2021 were observed in our finalised annual awards publication found below:

Child and Working Tax Credits statistics, finalised annual awards - 2020 to 2021

Finalisation occurs four to nine months after the end of the tax year when the family鈥檚 circumstances for the whole year are known and a finalised award can be calculated. Tax credits recipient families that delay reporting changes in household circumstances can result in either an overpayment or underpayment in their claim.

Main headlines

Figure 1: Number of awards by payment type and year

Figure 1 shows the number of tax credits claims that were overpaid, underpaid or paid correctly since 2018 to 2019.

The total number of tax credits continues to decrease, as has the number of underpaid, overpaid and awards paid correctly.

• 56% (1.36m) of tax credits were paid correctly, a rise of 5 percentage points compared to last year

• 31% (748k) of tax credits were overpaid, a fall of 5 percentage points compared to last year

• 13% (304k) of tax credits were underpaid, remaining relatively stable compared to last year

• the average amount overpaid this year was 拢972, and average amount underpaid this year was 拢782

Underpaid awards by band of payment

Figure 2: Underpaid awards by band of underpayment

Figure 2 shows the number of tax credits claims that were underpaid, split by band of underpayment, for both this year and last year鈥檚 finalised awards.

Underpayments can range from below 拢50 to over 拢2,000.

• the highest number of underpayments were in the 拢200 to 拢500 group, the same as last year

• the more than 拢2,000 payment group saw the smallest decrease in number of underpaid awards, of 14%

• the 拢50 to 拢100 payment group saw the largest decrease in number of underpaid awards, of 37%

Overpaid awards by band of payment

Figure 3: Overpaid awards by band of underpayment

Figure 3 shows the number of tax credits that were overpaid, split by band of overpayment, for both this year and last year鈥檚 finalised awards.

Overpayments can range from below 拢50 to over 拢2,000.

• the highest number of overpayments were in the 拢200 to 拢500 group, the same as last year

• the more than 拢2,000 payment group saw the smallest decrease in number of overpaid awards, of 18%

• on the other hand, the 拢500 to 拢1,000 payment group saw the largest decrease in number of overpaid awards, of 36%

Underpaid and overpaid awards by income band

Figure 4: Underpaid and overpaid awards by income band

Figure 4 shows the number of tax credits payments that were overpaid or underpaid based on the claimant鈥檚 income.

• the highest number of overpaid awards and underpaid awards were in the 拢20,000 to 拢30,000 income band group

• across all income bands, there were more overpaid awards than underpaid awards

• claimants with an income over 拢40,000 were 4.4 times more likely to have an overpayment than an underpayment

• those with incomes between 拢5,000 to 拢10,000 had the lowest relative number of overpayments to underpayments (1.4 overpayments for every underpayment)

Overpaid or underpaid awards by employment status and type of tax credit received

Figure 5: Overpaid or underpaid awards by employment status and type of tax credit received

Figure 5 shows the number of tax credits payments that were overpaid or underpaid based on the family鈥檚 employment status and type of tax credits received.

• the highest number of overpaid awards and underpaid awards were for those in work, receiving both WTC and CTC

• families in the 鈥榠n work, receiving both WTC and CTC鈥�, and families in the 鈥榠n work, receiving CTC only鈥� profile groups received more overpaid awards than underpaid awards

• families in the 鈥榦ut-of-work, receiving CTC only鈥�, and families in the 鈥榠n work with no children, receiving WTC only鈥� profile groups received more underpaid awards than overpaid awards

• the 鈥榠n work, receiving CTC only鈥� profile group had the largest relative number of overpayments to underpayments (1.5 overpayments for every underpayment)

• the 鈥榠n work with no children, receiving WTC only鈥� profile group had the lowest relative number of overpayments to underpayments (1.1 underpayments for every overpayment)