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Spend & Save

It's not just the poor who can gain from the benefits system

Middle Britain misses out as £16bn goes unclaimed.

You don't have to be poor to qualify for benefits. Government tax credits and childcare vouchers are targeted at families in middle-class Britain, while money off council tax is available for pensioners and for those living on their own.

But it seems that many Britons are reluctant to claim what they are due – perhaps through lack of knowledge, fears of heavy-handed bureaucracy or of being stigmatised for taking a "handout". As a result, leading charities are urging the Government to take action and reduce the £16bn in means-tested benefits and tax credits that goes unclaimed every year.

Figures published last week by Citizens Advice highlight glaring examples of poor take-up of benefits. Low-paid workers without children, for example, are missing out on tax credits worth at least £38 per week. There are also up to half a million households failing to claim for housing benefit, worth an average £37.60 per week.

It's a similar picture with the take-up of council tax benefit and pension credit. As many as £3m households miss out on around £13 a week in council tax benefit, and up to 1.7 million pensioners are under-claiming an average £31 a week in pension credit. Overall, up to £5.4bn in benefits is going unclaimed by older people each year.

"The means-tested system is clearly failing to reach many of the people it is meant to help, including middle Britain," says Andrew Harrop, the head of policy at Age Concern and Help the Aged. "The Government needs to work at full speed towards a more effective, automatic system for paying benefits."

So what are the benefits that you could, and should, be claiming for?

Tax credits

The complex tax-credits system has suffered with overpayments and errors, but don't let this put you off as tax credits could be worth thousands of pounds a year to you and your family.

Working tax credit (WTC) and child tax credit (CTC) are means-tested, so the amount you get will depend on several factors including your overall income level, how many hours you work, how many children you have living with you and if you pay for childcare.

CTC is made up of two parts; the "family element", worth a maximum of £545 a year, and the "child element", worth up to £2,235 per child in the current tax year. Further payments are available to those with disabled children and children under the age of one.

Even households with an income of as much as £50,000 are eligible for the entire family element of CTC. However, if you earn more than £16,040 the child element will be reduced.

The basic element of WTC is worth up to £1,890 a year and the couples and lone parent element up to £1,860. Again, there are further payments available if you qualify for the disability element. And, if you are over 50 and returning to work after being on state benefits for at least six months, you may be able to claim for extra tax credits worth up to £1,935 per year if you're working 30 hours or more per week.

Pension Credit

Pension credit is made up of two parts: The guarantees credit and the savings credit. The former is for the over-60s and guarantees to top up your income to at least £130 a week if you are single, or £198.45 a week for couples. From 6 April 2010, the pension-credit age will gradually rise in line with the increase in the state pension age for women from 60 to 65.

The savings credit rewards those over 65 who have saved towards their retirement with up to £20.40 a week for single people, and £27.03 a week for couples.

"While pensioners are feeling the impact of the recession on their pension pots more than ever, over one in four of them are failing to claim full pension credits. This resulted in as much as £2.4bn of pension credits being unclaimed last year," says Karen Barrett, the chief executive of Unbiased.co.uk.

Housing and Council Tax Benefit

If you are a low-earning tenant, you may be able to claim for help with your rent. If you rent a property or room from a private landlord, housing benefit is calculated according to the local housing allowance that applies to you. These rates are published at the end of each month and can be found on your council's website.

Council tax benefit is open to homeowners and tenants and eligibility for this and housing benefit is based on how much you and your partner earn, money from other benefits and occupational pensions, your savings and your circumstances. Typically, anyone with over £16,000 in savings, or living in the home of a close relative, as well as full-time students and asylum seekers, will not be eligible.

Importantly, child benefit is no longer counted as income when working out how much you can get. This may mean that you are now eligible for these benefits, so contact your council to check. Those entitled to income support, income-based jobseeker's allowance or the "guarantee credit" of pension credit could get a 100 per cent reduction on their bill.

Otherwise, you can have your council tax bill reduced by 25 per cent if you live on your own or if you share with other people but are the only person liable to pay council tax.

Jobseeker's Allowance and Income Support

If you are unemployed, are under the state pension age and registered as actively seeking employment you can claim for jobseeker's allowance (JSA), which is either contribution-based or income-based. The amount you receive will depend on your age and circumstances. For example, contribution-based JSA is worth up to £50.95 a week for 16- to 24-year-olds, and £64.30 a week for over-25s. The maximum weekly rates for income-based JSA is £100.95 for couples 18 and over and £64.30 for a lone parent aged 18 or over.

If you claim income-based JSA you are entitled to other benefits, including free dental treatment, prescriptions and sight tests, plus help with glasses or contact lenses costs. Apply through your local Jobcentre Plus.

If you are not looking for work because you are a lone parent, a carer, or suffering from an illness or disability, you may be entitled to income support instead. You will need to have savings of less than £16,000 and be out of work or working fewer than 16 hours a week.

Check if you are also entitled to free school meals, housing and council tax benefit and cold weather payment.

Childcare Vouchers

Childcare vouchers can be claimed by working parents in exchange for a reduction in their salary. Parents can sacrifice up to £55 a week and the vouchers are exempt from tax and national insurance contributions.

Both parents can use the vouchers, saving higher-rate tax payers as much as £1,195 a year. But the Prime Minister, Gordon Brown, has announced that top-rate taxpayers will have their benefits halved, so any new entrants to the scheme from 2011 will only get tax relief at the basic rate of 20 per cent.

However, some parents are unaware of the finer details of how childcare vouchers work. "Many parents simply don't realise they can be used for nannies and childminders and even music lessons if they are outside school hours," says Simon Moore, the head of Computershare Voucher Services, the childcare voucher provider.

Childcare vouchers are not for everyone, though. As with many other benefits, complications may arise if the vouchers affect your entitlement to other income-related or contributions-based benefits such as maternity pay and working tax credit. To make life easier, the Revenue and Customs website has a helpful calculator to determine whether you should claim or not.