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<p>The Tax Credit system has a degree of flexibility built in, in order to help claimants
manage changes in income. The Tax Credit disregard means that the first £2,500 of
an increase or decrease in household income, compared with the previous tax year is
disregarded. Therefore, carers, NHS staff and other key workers who take on additional
hours and experience an increase in income of up to £2,500 per year will see no change
in their overall Tax Credit award.</p><p> </p><p>The Government also recognises that
Tax Credits were introduced in the early 2000s and no longer fully reflect the world
of work for many people. That is why we are introducing Universal Credit.</p><p> </p><p>Universal
Credit replaces Tax Credits and other legacy benefits, to provide a single system
of means tested support for working age people. Universal Credit is assessed and paid
monthly and is based on claimants’ actual earnings in the month, rather than their
annual income.</p>
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