Child Tax Credits and Working Tax Credits

These tax credits replaced Working Families’ Tax Credit, Disabled Person’s Tax Credit and Children’s Tax Credit and the child-related elements of Income Support and Jobseeker’s Allowance.

Although they are administered by HM Revenue & Customs, these credits have nothing to do with the tax system and are not connected with how much tax you pay.

The general rule is that to qualify for tax credits you must be aged 16 or over and usually live in the United Kingdom. To apply for Child Tax Credit, you can contact the tax credit helpline for an application pack. The application to receive your entitlement to tax credits is form TC600. The helpline number is 0845 300 3900.

Couples must claim tax credits jointly, and entitlement will be based on the combined income of both partners.

Child Tax Credit (CTC)

CTC can be claimed by families with at least one child, and annual family income up to about £58,000.

When You Can Claim for a Child

You can claim tax credits for a child who lives with you, up to 31 August after their 16th birthday.

If your child is between 16 and 19, you can still claim tax credits for them if they’re:

  • still in full-time education, up to and including ‘A’ levels and NVQ level 3
  • on certain approved training courses (such as Entry to Employment, Skillbuild and Get Ready for Work).

If your child is between 16 and 17, and they’re not in full-time education or approved training, you can still claim tax credits for them for up to 20 weeks if they have signed up with the Careers Service, Connexions Service or Training and Employment Age and are not claiming income support or tax credits in their own right.

The amount of benefit is dependent on the number of children in the family, whether they have disabilities, and the total family income. It will be paid direct to the person who cares for the children.

CTC is made up of the following elements:

A family element that is payable to any family responsible for a child. It is paid at a higher rate to families with at least one child under the age of one.

A child element for each child the family is responsible for. This is paid at a higher rate if the child has a disability and at an enhanced rate for a child with a severe disability.

The basic family element of £545 per year is available in full to all families with joint income up to £50,000, with a tapering reduction up to income of about £58,000 (£66,000 for families with a child under one year old).

CTC will be paid directly through a bank account to the person who is mainly responsible for caring for the children in the family, either weekly or every four weeks.

Families with children are still able to claim Child Benefit, which is unaffected by, and continues to be paid separately from, the new tax credits.

Please use our Working/Child Tax Credit Calculator to see how much you are entiltled.

Working Tax Credit (WTC)

WTC is a tax credit for people in paid work who are on a relatively low income (for couples, joint income), including those with a disability. It replaces adult-related elements of Working Families’ Tax Credit and Disabled Person’s Tax Credit. It also includes support for the cost of eligible childcare.

WTC is for people who are employed or self employed (either on their own or in partnership) who

  • usually work 16 hours or more a week
  • are paid for that work, and
  • expect to work for at least 4 weeks

 

and who are:

  • 16 or over and responsible for at least one child, or
  • aged 16 or over and disabled, or
  • aged 25 or over and usually work at least 30 hours a week

 

WTC includes a basic element and a range of extra elements (see our CTC rates and allowances tables).

WTC is paid to the person who is working 16 or more hours a week. Couples where both work 16 hours or more a week may choose which of them will receive it. Claimants will receive their payments directly from HM Revenue & Customs. The childcare element of WTC will always be paid direct to the person who is mainly responsible for caring for the child or children, alongside payments of CTC.

Getting Working Tax Credit Backdated

You may be able to get some Working Tax Credit for a period before you apply, if you met the conditions and could have claimed earlier. Getting tax credit for a period before you apply is called ‘backdating’. You do not have to give any reasons why you did not claim earlier. When you apply ask for a backdated tax credit on your application form. You can only get Working Tax Credit backdated for a maximum of three months before the date you apply.

Basis of Assessment

Tax credit awards are based initially on income for the previous year. At the end of the tax year, when income for the year is known, the tax credits position is finalised. Any increase in income will be ignored to the extent of £25,000, but income above this limit will result in a reassessment.

During the Year

If income rises significantly, you should tell HM Revenue & Customs so that the award can be adjusted. Otherwise, you may receive too much tax credit and have to pay it back when the award is finalised at the end of the year.

If income falls, you can ask to have your tax credits paid on the basis of an estimate of your income for the year. But if you do that, you will have to tell HM Revenue & Customs straight away if you think your income will be higher than your estimate.

Any relevant change in circumstances must be notified to HM Revenue & Customs within three months.

Income for Tax Credit Purposes

Income is broadly aligned with the claimant’s gross taxable income (i.e. before the deduction of income tax and National Insurance Contributions). Earnings will be taken from P60 certificates for employees and self assessment returns for self employed claimants.

Please use our Working/Child Tax Credit Calculator to see how much you are entiltled.