Is working tax credit taxable income?
Answered 17 March 2026
The answer is clear from the legislation. Here is a definitive response:
Is Working Tax Credit Taxable Income?
No. Working Tax Credit is not taxable income. It is wholly exempt from income tax by statute.
What the law says
Section 677(1) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) provides that "no liability to income tax arises" on the UK social security benefits listed in Table B of that section. Working Tax Credit (payable under Part 1 of the Tax Credits Act 2002) is explicitly listed in Table B of that provision. The same table also exempts Child Tax Credit (also under TCA 2002, Part 1).
HMRC guidance / practice
HMRC guidance on tax credits confirms that while Working Tax Credit itself is not taxable, the income used to calculate entitlement to Working Tax Credit is based on taxable income concepts. For example, self-employed income for WTC purposes means the taxable profit under ITTOIA 2005 (after deduction of business expenses), and certain coronavirus support scheme payments (e.g. SEISS) are included as trading income for WTC purposes. This is a separate question from whether WTC receipts themselves are taxable — they are not.
In summary: Working Tax Credit payments received by a claimant are entirely exempt from income tax under ITEPA 2003, s.677(1) and Table B.
Citation sources
rsal credit WRA 2012 Part 1 Any provision made for Northern Ireland which corresponds to Part 1 of WRA 2012 Welfare supplementary payment payable pursuant a reduction of the amount payable of housing benefit HB(WSP)R(NI) 2017 Regulation 2 WSPR(NI) 2016 Regulation 4 Welfare supplementary payment payable pursuant to a reduction of the amount payable of employment and support allowance WSP(LCP)R(NI) 2016 Regulation 8 (when the recipient is entitled to the payment by meeting the condition in regulat
Self-employed income for the purpose of calculating entitlement to tax credits will be the taxable profit for the year from the person’s work in their trade, profession, or vocation which is commercial with a view to the realisation of profits or their partnership share of net profit if the person is a partner in a trade, profession or vocation. For tax credit purposes, ‘taxable profit’ has the same meaning as it has in ITTIOA 2005 - that is, the amount after the deduction of business expenses.
Part 10 Social security income Chapter 5 UK social security benefits wholly exempt from income tax UK social security benefits wholly exempt from tax: Table B 677 1 No liability to income tax arises on the United Kingdom social security benefits listed in Table B. TABLE B—PART 1 BENEFITS PAYABLE UNDER PRIMARY LEGISLATION AND NORTHERN IRELAND WELFARE SUPPLEMENTARY PAYMENTS etc Social security benefit Payable under Adult Disability Payment SS(S)A 2018 Sections 24 and 31 Attendance allowance SSCBA