Child Tax Credits

If you have children you may be entitled to child tax credit; if you work, you may also be entitled to working tax credit. The government has changed the salary threshold for receiving such benefits, so if you're confused this page offers some basic information about Child Tax Credit. New changes came into place on 6th April 2012 - read more below.

What is Child tax credit?

Child Tax Credit is for people who are responsible for at least one child or qualifying young person. It is dependent on income. Child Tax Credit is paid direct to the person who is mainly responsible for caring for the child or children. If you are a lone parent you will receive the payment.

If you are on benefits such as Income Support and Jobseeker’s Allowance, you will get the maximum Child Tax Credit for your circumstances. If you are not on any of these benefits, your tax credits depend on your income. Your initial award is always based on your income in the previous tax year, but it can be finalised or revised based on the current tax year, depending on what has happened to your income.

How Child Tax Credit works

From 6th April 2012, some people will lose their entitlement to Child Tax Credits. A key change is that the income limit for Child Tax Credit is being reduced. Tax Credits are very complicated to work out and you may need to contact your tax office if you're not sure your income has been correctly calculated (if, for example, you are self-employed, or your earnings vary from year to year). But roughly speaking, from April 6th the following households will no longer receive Tax Credit if:

•             you have one child, and your annual income is more than around £26,000

•             you have two children, and your annual income is more than around £32,200

However, if you pay for childcare, are disabled, or have more than two children you could qualify 

with income above these amounts. In addition, the following guidelines also apply:

•             If you are eligible for Child Tax Credit only, you can earn £15,860 before the maximum award is reduced.

•             If you are eligible for (but not necessarily receiving) Working Tax Credit, on its own or with child tax credit 2013, the award starts being reduced once your income is more than £6,420 per year. 

•             If you earn above this threshold, you lose 41p of Tax Credits for every £1, so someone who is eligible for Working Tax Credit and had income of £6,421 in the tax year on which their award was  based, would get their maximum award less 41p.

•             When your tax credits are reduced, you lose the main elements of Working Tax Credit first, then the childcare element of Working Tax Credit, and finally child elements of Child Tax Credit

•             The family element of Child Tax Credit is not reduced unless you have income of over £40,000.

•             If your income is over £40,000, the family element usually starts to be reduced by 41p for every £1 above £40,000. This does not happen to every family, because some families with a large maximum award of tax credits will be left with more than the family element when the first threshold is applied.

There are other changes coming into effect that change the way tax credit is paid from April 2012:

•             Tax Credits will be withdrawn faster as a person's income rises.

•             If your income falls by up to £2,500 during the Tax Credit award year, the amount you get will not be revised to see if you are entitled to a higher Tax Credit payment.

•             You will only be able to backdate new applications and changes of circumstances for up to one month instead of the previous three months.

•             Couples with children must work at least 24 hours a week between them, with one working at least 16 hours to qualify for Working Tax Credit. This excludes couples with children where one member is entitled to the Working Tax Credit disability element.

•             Couple and lone parent rates of Working Tax Credit will be frozen.

A good place to start if you want to work out if you're eligible for child tax credit and working tax credit, and how much money you are likely to get, is the HM Revenue website. You'll find lots of information plus a calculator which helps you work out your benefits.

How do I claim?

Both Child Tax and Working Tax Credits can be claimed using the same form, obtained by phoning the helpline on 0845 300 3900.


 Related Post:
 Child Tax Credit – 11 Key Points

To find out more, simply contact HM Revenue & Customs to see if you are eligible for Tax Credits and to request a claim pack. Or if you are already claiming and have any questions, don't hesitate to get in touch by calling the helpline.

If you live in England, Scotland, Wales or Northern Ireland

The tax credits Helpline is open from 8am to 8pm, every day including weekends (except Christmas Day, Boxing Day, New Year's Day and Easter Sunday).

 

How much will I get?

The amount in child tax and working tax credits you get will depend on your current circumstances, for example, the number of children in your household, the number of hours you and your partner work, and your household's gross income for the last tax year. Claims for the current tax year will initially be based on the previous tax year’s income. Awards will run until the end of the tax year, but if there is a change in your circumstances, for example you go on maternity leave, you can ask for the award to be adjusted from the date of the change. It's important to advise the Inland Revenue of any changes to your circumstances to avoid over-payments or problems with your claim. 

If you are on income support or receive money through job-seekers allowance then child and working tax credits will be combined with the payments you already receive. Additional allowances can be claimed for parents with a disabled child or indeed, if one of the parents is disabled themselves.