Tax credits: what are parents entitled to?
If you are wondering 'am I entitled to tax credits?' this article contains key information regarding parental benefits. Some parents may think that they will not be eligible for benefits over and above Child Benefit. In fact, the vast majority of UK families are eligible for additional financial assistance. There are two forms of tax credits to which you may be entitled: Child Tax Credit and Working Tax Credit.
Child Tax Credits
If you are 16 or over, responsible for at least one child, you will be entitled to Child Tax Credit if:
- You have one child, and your household annual income is less than around £26,000.
- You have two children, and your household annual income is less than around £32,200.
Even if you earn more than this you may still be entitled to Child Tax Credit under different circumstances. HM Revenues & Customs has a Tax credits calculator you can use to find out.
You are treated as working during maternity leave, paternity leave or shared parental leave. All of your Maternity Allowance, Child Benefit and the first £100 pw of your Statutory Maternity Pay is ignored as income. This means that you may qualify for tax credits while you are on maternity leave even if you don’t normally qualify for them when you are at work.
Who can get Child Tax Credits?
- Child tax credits are given to people responsible for at least one child.
- You are entitled to claim them whether you are working or not.
You will receive money for each child you are responsible for and if you live as part of a couple then you must make your claim as a couple.
How much are child tax credits worth?
Child Tax Credits are made up of two elements, family and child. The calculation of how much you’re entitled to will depend on your circumstances. The table below illustrates the maximum allowances you can expect.
Child Tax Credit elements
What it means
Current maximum amount (per year)
|Family element - the basic element||It's the basic payment if you are responsible for one or more children.||£545|
|Child element||This is paid for each of your children. It is paid on top of the basic family element and any baby addition.||£2,780|
|Disability element||This is an extra payment for each disabled child you have.||£3,140|
|Severe disability element||This is an extra payment for each severely disabled child you have. It is paid on top of any disability element.||£1,275|
Note: if you receive Child Tax Credit of at least the Family Element or another qualifying benefit you can claim the Sure Start Maternity Grant. You must claim it from 11 weeks before your baby is due until three months after the birth. You cannot make a late claim. You can claim it for your first baby or first multiple birth.
Change of circumstances
If your circumstances change while you are being paid tax credits, for example, you have a new baby, you become part of a couple/single or your childcare costs are reduced or stop, you must let HM Revenue & Customs know as soon as possible.
If your income goes up more than £2500 per year from April 2016 you must let HM Revenue & Customs know as only £2500 of any increase can be disregarded. If you do not notify HM Revenue & Customs it may result in an overpayment of tax credits. This is particularly important for women returning from maternity leave as your income is likely to be much lower while you are receiving Statutory Maternity Pay or Maternity Allowance, which are ignored as income for tax credit purposes, but will change as soon as you return to work.
Working Tax Credit
Working Tax Credit is a payment for people who are working and on a low income. You may be able to get credits to help with the cost of childcare while you are working.
Who is eligible for Working Tax Credit?
Working Tax Credit can be given to any single parent older than 16 and responsible for a child, working at least 16 hours a week. If you’re part of a couple, and responsible for a child, you can receive this credit if:
- either yourself or your partner works at least 16 hours;
- and, as a couple you work at least 24 hours a week.
Childcare element of Working Tax Credit
The exact amount you receive will depend on your income, the lower it is the more you’ll receive.
Number of children
Weekly limit on costs
% of costs you can get help with
Maximum tax credits for childcare
|Two or more children||£300||70%||£300x70%= £210|
However, if you claim Childcare Vouchers from your employer the value of the vouchers you receive will be taken off the amount you can claim through Working Tax Credits. For example, if you claim the full £243 per month vouchers from your employer, the monthly amount of childcare help you can claim reduces by this amount.
HM Revenue & Customs provides further information and a calculator to help you decide what will be best for you and to provide you with guidance if you choose to apply for Working Tax Credit.
What type of childcare qualifies?
They must be registered or approved childcare provider and could be a childminder or nursery. The following bodies register childcare providers in the UK:
- Ofsted in England
- The Care and Social Services Inspectorate for Wales
- The Scottish Commission for the Regulation of Care
- A Health and Social Services Board or Trust in Northern Ireland
It’s always advisable to use a properly registered provider when considering childcare.
Get ready for Universal Credit
Universal credit is gradually being introduced across the country. The areas where you can claim Universal Credit, including the areas that are starting to take claims from families with children, are listed at www.gov.uk/jobcentres-where-you-can-claim-universal-credit. Universal credit is a single monthly payment, for people who are in work and out of work that will replace income-based Jobseeker’s Allowance, income-based Employment Support Allowance, Income Support, Child Tax Credit, Working Tax Credit, and Housing Benefit.
You can get transitional cash protection if your award of universal credit is less than your previous benefit award.
Universal credits (monthly rates)
Age of parent
There are also disabled child additions: lower rate is £126.11 and higher rate is £367.92.
As of 11 April 2016, you can also get up to 85% of your registered childcare costs up to the maximum of: £646.29 (one child) and £1108.50 (two or more children).
There is a benefit cap of £500 per week if you are a couple or have children or £350 per week if you are single with no children. From Autumn 2016 the benefit cap will be reduced and will have different rates for those who live in or outside London. If you receive more than the benefit cap your Housing Benefit or Universal Credit will be reduced in line with the cap. Some of the benefits included in the cap are Child Benefit, Child Tax Credit, Housing Benefit, Income Support, Jobseeker’s Allowance, Employment Support Allowance and Maternity Allowance.
HM Revenue & Customs has published Working Tax Credit – Help with the cost of childcare.
HM Revenue & Customs Childcare vouchers and tax credits – better off calculator.
See also the Money Advice Service and read their Parent’s guide to money.
Gov.uk has information about the maternity grant.
You cancall the Tax Credit helpline on 0345 300 3900 or the Universal Credit Helpline on 0345 600 0723.
See also the benefits calculator, posted by Turn2us, a national charity which helps people to access the benefits which are available to them.