What is Child Tax Credit?
Child Tax Credit is a type of benefit given to people who might be on low income. It pays you certain amount of money every month which is exempt from income tax.
Who can claim Child Tax Credit?
Couples or single parents who are responsible for looking after a child under the age of 16 (or 20 if the child is in approved education or training) can apply for Child Tax Credit. You do not have to be in employment to claim Child Tax Credit. If you are, it will effect the amount you would receive.
How much is paid as Child Tax Credit?
HM Revenue and Customs pays you a certain amount every month and the payment depends on various factors such as number of children; your income from employment or self-employment as well as any additional income from your saving or investment.
The amount also depends on if a household has any disabled child. In this situation the receiving money would increase.
Child Tax Credit is made up of various elements (number of payments) which are added together. In a household where there is only one child the payment would include the Basic element which is £545 a year + and for each child there is another £2720 a year. A household where a child is disabled, an additional amount (up to) of £3015 (on top of £2720) is paid . And a further amount of £1220 on top of £3015 + £2720 if the child is severely disabled.
To make it simple lets take an example:
A household has one child so the yearly Child Tax Credit amount would be made up of
Basic element of £545 + £2720 = £3265 (paid in a year)
If a household has a child with disability then the amount would be made up of
Basic element of £545 + £2720 + £3015 = £6280 (paid in a year)
A further amount of £1220 will be paid on top of any other elements already included if the child is severely disabled. (£545 + £2720 + £3015 + £1220 = £7500 (paid in a year).
The total Child Tax Credit amount is then divided by 12 (months in a year) and then paid monthly.
Current Child Tax Credit rates for 2013-2014 if you are not working (means that you would not be eligible for Working Tax Credit):
Your total yearly income If you have one child Two Children Three Children
Below £5,000 £3,270 £5,995 £8,715
£8,000 £3,270 £5,995 £8,715
£10,000 £3,270 £5,995 £8,715
£15,000 £3,270 £5,995 £8,715
£20,000 £1,595 £4,315 £7,040
£25,000 £0 £2,265 £4,990
£30,000 £0 £215 £2,940
£35,000 £0 £0 £890
As you can see that after a certain amount of income, your Child Tax Credit will start to decrease and in some cases you will not be paid any money at all. However the above information may not be correct in certain situations, i.e. if you have more than 3 children.
To have an idea how much Child and Working Tax Credits your household might be eligible for, go to Tax Credit Calculator and enter your details to find out how much you might receive a month for Tax Credits.
Confused about what the income column is all about if you are not working? Well, income means anything that your household receives as money. It can be any benefits such as Job Seeker’s Allowance to Income Support or any payment you might be getting from your investment or interest on capital.
It is important to note that the amount of Child Tax Credit will depend on whether your household is eligible to claim Working Tax Credit or not. If not then your payment will differ.
If you and your partner both work at least 24 hours a week between you (where one of you working at least 16 hours a week and the other working the remaining hours, i. e. 8 hours a week), your household may also qualify for Working Tax Credit. If this is the case, the rates of Child Tax Credit will be different from when you or your partner is not working.
Current Child Tax Credit rates for 2013-2014 if you meet the condition for Working Tax Credit):
Family element £545
Child element £2720 for each qualifying child
Disabled child element £3015 paid on top of the child element
Severely disabled child element £1220 paid on top of the child and disability elements
You might also get some extra money under Childcare element if both you and your partner work and due to the work you have to pay for child minding. You have to use a registered or approved child minding person (the approved child minding persons list can be obtained from your local council).
You can claim up to 70% of the childcare cost (not exceeding £175 per week for one child or £300 for two or more children). This amount is paid extra on top of your Child or Working Tax Credits.
Note: Childcare cost is only paid when you or both of you are working and cannot avoid hiring someone to look after your child or children.
How to apply for Child Tax Credit?
The process for applying for Child Tax Credit is same as applying for Working Tax Credit by calling HMRC (HM Revenue and Customs) on 0345 300 3900. Once you are on the phone to them and your working, family and income details and circumstances have been taken, you will be sent a pack to fill out to make your claim.
Before contacting HMRC, make sure you have information such as your national insurance number, bank details, income estimate etc. handy. Further details on what else you might need can be accessed on our How to Apply for Working Tax Credit.