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<p>Tax Credits for the self-employed lack a strong incentive for claimants to grow
their earnings and reduce their dependency on welfare. The rules for eligibility for
Working Tax Credit (WTC) are set out in the Tax Credits Act 2002 and the associated
regulations, in particular the Working Tax Credit (Entitlement and Maximum Rate) Regulations
2002. These do not include a requirement for those claiming WTC to increase their
earnings, or to earn more than a specified amount.</p><p> </p><p>The Government introduced
the strengthened self-employment test into Working Tax Credit in 2015 to address the
risk of individuals continuing to claim WTC, despite not working on a commercial and
with a view to a profit basis. HMRC advice on this is in the link below:</p><p> </p><p><a
href="https://www.gov.uk/government/publications/revenue-and-customs-brief-7-2015-new-rules-for-the-self-employed-claiming-working-tax-credit/revenue-and-customs-brief-7-2015-new-rules-for-the-self-employed-claiming-working-tax-credit"
target="_blank">https://www.gov.uk/government/publications/revenue-and-customs-brief-7-2015-new-rules-for-the-self-employed-claiming-working-tax-credit/revenue-and-customs-brief-7-2015-new-rules-for-the-self-employed-claiming-working-tax-credit</a></p><p>
</p><p>Historically, a high proportion of self-employed Tax Credit claimants saw little
progression in their earnings over several years, including many of the lowest earners.</p><p>
</p><p>Recently, HMRC and DWP have published data from a survey of self-employed tax
credit claimants. These data confirm that many such claimants have low earnings and
demonstrate the need to support and incentivise claimants to grow their earnings:</p><p>
</p><p><a href="https://www.gov.uk/government/publications/self-employment-working-tax-credits-claimant-survey-and-follow-up-research"
target="_blank">https://www.gov.uk/government/publications/self-employment-working-tax-credits-claimant-survey-and-follow-up-research</a></p>
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