What are tax credits?

What are tax credits?

Tax credits are payments from the government that are paid directly into your bank, building society, Post Office or National Savings account (if it accepts Direct Payment) either weekly or every 4 weeks. Essentially, there are two types of tax credit, Child Tax Credit (CTC) and Working Tax Credit (WTC). Childcare Credit is also available in addition to tax credits, in order to help those who work at least 16 hours a week with the cost of childcare.

• Child Tax Credit
• Working
  Tax Credit
• Childcare
  Credit

Child Tax Credits

• What are tax credits?
• Who is eligible?
• Adoptive parents and foster parents
• How much am I entitled to?
• How does it work?
• How can I claim?
• Who should claim?

What are tax credits?

Child Tax Credit is for families who are responsible for
at least one child or qualifying young person.

Who is eligible?

The general rule is that to qualify for tax credits you
must be aged 16 or over and usually live in the United Kingdom. You may
also qualify if you do not live in the UK but you are:

• A citizen of another country in the European Economic Area (EEA) and
  you work in the United Kingdom, or
• A Crown Servant posted overseas, or
• A citizen of a country in the European Economic Area (including the
  UK) living abroad and you receive a UK state pension or contributions-based
  Jobseeker’s Allowance.

Child Tax Credits are for families who are responsible for
at least one child or qualifying young person. If you look after any children
under the age of 16 then you may be able to claim Child Tax Credit to
help with the cost of looking after them. Unlike Working Tax Credits,
you do not need to be working to claim. You can claim tax credits for
a child who lives with you, up until the 31st of 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, NVQ
  level 3 or Scottish Highers
• in approved training like 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 Agency.

Adoptive parents and foster parents

If you are adopting or fostering a child then you are eligible
to claim tax credits, providing that you are not receiving any money from
your local authority or Health and Services Board. If this is the case
then you will need to contact HM Revenue & Customs to confirm whether
or not you can still claim tax credits.

How much am I entitled to?

The amount of tax credits you get depends on things like:

• how many children you have living with you
• whether you work – and how many hours you work
• if you pay for childcare
• if you, or any child living with you, has a disability
• if you’re aged 50 plus and are coming off benefits

Your payments are also dependent on your income. The lower
your income, the more tax credit you can claim.

• You are entitled to Child Tax Credit if your income (or if you have
  a partner, your joint income) is less than £58,000 a year (£66,000 if
  there is at least one child who is less than a year old)
• In the first year of your child’s life you may be entitled to extra
  money to help cover childcare costs.For more information, click
  here
• If you are already claiming tax credits for one child, you may be
  entitled to more money if you then have a second child
• If you are working you may be eligible for Working Tax Credit, including
  help with childcare costs
• If you are already claiming Income Support or Income-Based Jobseeker’s
  Allowance then HMRC will pay the amount of Child Tax Credits that you
  are entitled to through your income support or income-based Jobseeker’s
  Allowance

How does it work?

The tax credit payments that you receive are based on your income from
the tax year that ended on the 5th April 2008, as well as your current
personal circumstances. If you make a new claim for tax credits then your
payments will usually run from the date of your claim until the end of
the tax year. For instance, if you make a claim on the 6th September then
your payments will be worked out from that date until 5 April 2009.

How can I claim tax credits?

In order to claim tax credits you have to fill in a tax credits claim
form, which you can order by calling the Tax Credit Helpline on 0845 300
3900 or textphone 0845 300 3909. The helpline is open from 8.00 am to
8.00 pm every day except Christmas Day, Boxing Day and New Year’s Day.

Who should claim?

If you live with someone as a couple then you must make a joint tax
credits claim. You cannot just claim as a single person, you will need
to put down information about both of you on the claim form and you will
share a responsibility for making sure that this information is correct.
The HMRC
website provides further information on what they define as a couple.

If your child lives with you and also sometimes lives with else, such
as your ex-partner, then only one of you is eligible to claim for tax
credits. It is generally the case that Child Tax Credit is paid directly
to the person who can be classed as the main carer. If you cannot come
to a joint decision, and both of you make a claim, the Tax Credit Office
will contact both of you individually and then decide who is eligible
to receive the payments.

If you child lives outside of the UK, you can only claim Child Tax Credits
under the following circumstances:

• If they live in another European Economic Area country or Switzerland
• If they live with your partner, or
• They are financially dependent on you

Useful Links

• Childcare
  Credits
• Working
  Tax Credits
• Child
  Benefit
• Child
  Trust Funds
• Sure
  Start Maternity Grant