Tax Credits
Despite its name, Child Tax Credit (CTC) has little, if anything, to do with tax. In fact, CTC is a social security benefit that is paid to parents and guardians of children under 16 whose income is low enough to qualify.
CTC is paid regularly, usually into the claimant’s bank account, and isn’t deducted from the claimant’s tax bill. Children are eligible up to 1 September following their 16th birthday.
The credit remains payable after that date for those in full-time education (excluding further education) up to the age of 19, and for up to eight weeks following the death of a child. The usual test to be applied is that the child is living with the claimant(s).
Working Tax Credit (WTC) is paid to people on low incomes who satisfy certain age requirements and who work more than a certain number of hours a week. It also has a childcare element, which provides claimants with help to cover the costs of registered or approved childcare. Individuals can generally claim the childcare element for any child up to the Saturday following 1 September after the child’s 15th birthday, and the claim can be extended for one year in certain circumstances.
The childcare element can help with 70% of eligible childcare costs (which are those paid to a registered or approved childcare provider) up to a maximum of £175 a week for one child and £300 a week for two or more children. Therefore, it is possible to get up to £122 per week for one child and £210 per week for two of more children.
If the claimant employs an approved home childcare provider, such as a childminder or nanny, it is possible to claim up to 70% of the gross costs of employing that person within the £175 or £300 a week limits. This includes the cost of employer’s NICs, benefits in kind, insurance etc.
Making a claim is often worthwhile, especially given that claimants do not necessarily have to work, or pay tax, to receive CTC. Many people who qualify do not get anything simply because they do not bother to apply.
Child Benefit
Although under the new Government review for the time-being child benefit continues to be paid tax-free to anyone bringing up a child or young person, from April 2011 the weekly rate payable is £20.30 for the eldest, or only, child and £13.40 for other children.
In addition to child benefit, someone entitled to child benefit for a child or young person who is not their own, may also be entitled to guardian’s allowance for them if both of his parents have died or, in some circumstances, where only one parent has died. From April 2011, guardian’s allowance is payable at the weekly rate of £14.75.
Practical Tip
Child benefit is payable for a whole extra year for a child born on 1 September than one born the day before on 31 August – so plan ahead!
By Sarah Laing
