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<p>The Tax Credit system has a degree of flexibility, 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 working additional hours and experiencing
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 recognises that Tax Credits were introduced
in the early 2000s and no longer fully reflect the world of work for many people,
and that is why the Government is 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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