Can I Claim Working Tax Credits On A Zero-Hour Contract?

By HuutiMoney
Page last updated: 23/11/2022 | Next review date: 23/11/2024
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This blog post aims to help its readers in being able to answer the question of whether or not one can claim Working Tax Credits while they are employed on a zero-hour contract. For a deeper understanding of the topic, we will not only explore the impact of a zero-hour contract on a Working Tax Credits claim but also discuss the other benefits a zero-hour contract worker can claim. Additionally, we will also analyse the pros and cons of having a zero-hour contract. 

Can I Claim Working Tax Credits On A Zero-Hour Contract?

Yes, you can claim Working Tax Credits on a zero-hour contract as long as you work for 16 hours or more per week. In addition to this, you should also be working for at least 4 weeks before you file a claim for Working Tax Credits.

Irrespective of whether a claimant works full-time, part-time or on a zero-hour contract, one would need to work for a certain number of hours according to the age bracket that they belong to so that they can claim Working Tax Credits:

  • if someone is aged between 25 to 59 years, they should be working at least 30 hours per week to claim Working Tax Credits
  • if someone is aged 60 years or above, they should be working at least 16 hours per week to claim Working Tax Credits
  • if someone is disabled, they should be working at least 16 hours per week to claim Working Tax Credits
  • If someone is single with 1 or more children, they should be working at least 16 hours per week to claim Working Tax Credits
  • if someone is part of a couple with 1 or more children, they should be working at least 24 hours between them and their partner (with one of them working at least 16 hours) to claim Working Tax Credits

The amount that you can get with a Working Tax Credits claim depends on your income and circumstance. It can be classified as follows:

  • if you are a couple applying together, you can claim up to £2,125 a year
  • if you are a single parent, you can claim up to £2,125 a year
  • if work at least 30 hours a week, you can claim up to £860 a year
  • if you have a disability, you can claim up to £3,345 a year
  • if you have a severe disability, you can claim up to £1,445 a year 
  • if you are responsible for approved childcare, you can claim £122.50 a week for 1 child or £210 for 2 or more children

If you do not qualify for Working Tax Credits, you can apply for Universal Credit instead.

Zero-hour contracts or casual contracts are put in place when the employee is working on a “piece work” or “on-call” basis. Even though zero-hour contract workers do not get the same privileges as employees do, they are still entitled to Statutory Annual Leave and National Minimum Wage in the same way as regular workers. 

Which Benefits Are Affected By A Zero-Hour Contract?

If you are claiming any of the following benefits, your payments will be affected if you work under a zero-hour contract:

  • If you claim Income Support, you cannot work for more than 16 hours per week to remain eligible for the benefits. This is a non-taxable, means-tested benefit which takes your income and savings into account before your claim is approved. Qualifying individuals in England, Northern Ireland, Scotland and Wales receive financial support through this benefit if they are low on income or unemployed and do not qualify for JSA or ESA.
  • If you are on Jobseeker’s Allowance, you can only work for a maximum limit of 16 hours per week. This is a taxable benefit that takes your income and savings into account only if you claim income-based JSA. If you apply for a contribution-based JSA, there will be no means test. 
  • If you get Employment & Support Allowance, you will not be allowed to work if you wish to receive ESA payments. However, in certain circumstances, you may be able to work for 16 hours per week under the “Permitted Work” criteria of this benefit. The condition of this exception is that you should not earn more than £143 during this time.

What Are The Pros And Cons Of A Zero-Hour Contract?

Below is a comparison of some of the key pros and cons of a zero-hour contract:

Pros of a zero hour contractCons of a zero hour contract
You can choose flexible working hours according to your preference. This allows you to turn down work that you do not wish to accept.Your typical working day may lack a schedule and structure. Flexible working hours can lead to working less on some days while working more on others.
If you are unable to reach your income goals under a zero hour contract, you can look for additional work with another employer as there is no exclusivity clause for zero hour workers.With fluctuating incomes every month, you may find it difficult to budget your expenses especially in times of a rise in living costs. It may also be difficult for you to get a loan if you can’t prove a regular income source.
A zero hours contract allows a worker to work for multiple employers at the same time; allowing them to use different skills at the same time or the same skills for different workplaces.Having a non-rigid set of working hours and income can affect the benefits claims of zero hour contract workers as some of them qualify claimants on the basis of their income and working hours.

Conclusion:

The above discussion has brought us to the conclusion that zero-hour contract workers can claim Working Tax Credits; however, they should be able to meet the minimum working hours criteria set at 16 hours. Whether a WTC claimant is a full-time, part-time or zero-hour contract worker, their eligibility for a benefit claim such as Working Tax Credits depends on their income as well as circumstances; which eventually lead to the required number of working hours.

References:

Zero Hour Contract Benefits & Disadvantages | The Mix

Citizens Advice warns on zero-hours contracts

What’s a zero-hour contract? – Money For Life