What is Child Tax Credit?

To support the families with children, Her Majesty’s Revenue and Customs (HMRC) pays Child tax credit (CTC) to them. In addition to the child benefit, a family receives the Child tax credit and they can claim it irrespective of the fact that the family is employed or not. Per the policy, the Child tax credit amount should be used for the benefit of children. Hence, parents should be alert and not miss out on THE opportunity of claiming child tax credit. The Child tax credit is beneficial for parents who have a low income and have the responsibility of at least one child. Parents can even get money for each child they are responsible for. Additional child tax credit (CTC) is available for parents if the child has a disability, and the parents are eligible for Personal Independence Payments (PIP), and Disability Living Allowance (DLA).

 Advanced Guide for Claiming your - Child Tax Credit

How much is Child Tax Credit Amount?

Child tax credit comprises of two important elements:

  • The “family element” – a family with atleast one child is eligible and the CTC is paid to the family.
  • The “child element” – this credit is paid for each child / young members in a family. The amount corresponding to the child element may be higher for children with a disability.

As part of a family element, a family can get up to £545 a year. Depending on an individual’s circumstances, they can be eligible for an extra amount above the mentioned amount. The rates for tax year 2018-2019 are:

Child Tax Credit rates for the 2018 to 2019 tax year

Element Yearly amount
The basic amount (this is known as ‘the family element’) Up to £545
For each child (this is known as ‘the child element’) Up to £2,780
For each disabled child Up to £3,275 (on top of the child element)
For each severely disabled child Up to £1,325 (on top of the child element and the disabled child element)

A family can get the child tax credit amount based on certain criteria, such as:

  • The income of a family
  • Number of children living in a family and the ages of the children
  • If the dependent / child has any disability
  • If a family member is working, HMRC will also consider the number of hours being worked and the child care cost

The computation of Child tax credit is complex. As mentioned above, the amount a family is eligible for depends a lot on their circumstances. For a family with a yearly household income of £16,105 or below, the family is eligible for a maximum amount for each CTC element they qualify for. This limit is known as the ‘income threshold’. A family earning more will be eligible for a reduced amount of the CTC element.

Since, the CTC is dependent on a lot of factors; the table below will help to understand the upper yearly family income limit for getting a CTC. A family’s income that is below or near the figures mentioned below might be able to get a tax credit.

For a family that has childcare costs

Number of children Annual household income limit for 2018-19
1 £40,000
2 £55,000
3 £65,000

For a family that doesn’t have childcare costs

Number of children Annual household income limit for 2018-19
1 £25,000
2 £35,000
3 £40,000

Child Tax Credit Renewal

Child tax credit needs to be renewed every year for it to continue every year. The Tax credit office keep the family posted on what steps they need to follow to renew the tax credit. It is obvious that a family’s circumstances can change during a fiscal year, and such information, like income changes etc., need to be conveyed to the Tax credit office by calling the child tax credit helpline 0345-300-3900. Changes in a family’s circumstances can affect the tax credit amount. For example, a family can get more support if there is a reduction in the income due to any reason, or an increase in the income can result into a lower amount. Starting April 2016, the amount by which the income can vary fell from £5,000 to £2,500. Due to the revised rates, if the income goes above £2,500 and the tax credit office is unaware about the change, the family / parents will be asked to pay back the extra amount. This extra amount will either be recovered by reducing the future tax credits or a direct payment in case the CTC will not be used in the future. On the contrary, it is advantageous if the income falls by £2,500 or more as the family will be eligible for more tax credits.

To avoid any lapse, as a best practice, the Tax credit office should be informed within 30 days of when the family receives the extra money. It becomes easy for the office to compute the tax credit adjusted and nullifies the chances of an overpayment or tax credit reversal.

How to Claim Child Tax Credit

To claim CTC, a family must be responsible for a child or a dependent young member in the family. “To be responsible” is defined as:

  • The child or dependent ‘normally lives with the family’; or
  • If the child lives with multiple families, then the responsibility shifts with the family that has the ‘main responsibility’

A family can’t get CTC for a child or young person who is:

  • Aged 16 or over, and getting income support, income-based jobseeker’s stipend, inability benefit, employment allowance , support allowance, or tax credits in their own right
  • Aged 16 or over, have discontinued full-time non-advanced education or permitted training, on recorded of a qualifying body, but then taking up paid work for 24 hours or more a week during the extension period of 20 week
  • Serving a custodial punishment greater than 4 months made compulsory by a court

If a child is living under the terms of a residence order, or special guardianship order, or the child is adopted, the family is treated responsible for the child, even if the local authority is making a discretionary payment, because the local authority is no longer “taking care / looking after” the child.

The Child tax credit is paid by HM Revenue and can be claimed through form - TC600. The form is available from the local HM Revenue office or the child tax credit telephone number, 0345-300-3900. Couples (this includes same sex partners) ought to make a joint claim. If a family has already been claiming tax credits, they need to call the CTC helpline to update their claim.

The main responsibility test

This is a test applied, when there are challenging claims. In such cases, HMRC will make the decision, if both parties involved can’t decide mutually. When deciding on main responsibility, the factors HMRC take into account include the following:

  • Who the child is living with and where are the major belongings of the child kept such as clothes and toys
  • Who is responsible for the daily expenses for the child such as clothes, food, books, and others
  • Who is the primary contact person in case of emergency in the school, nursery or childcare provider
  • Who is responsible for the health care and cleanliness of the child. This may include doctor or dentist appointments
  • What is the registered address in schools, and other places
  • Who has legal custody of the child

How to Apply for Child Tax Credit

For parents who are claiming the child tax credit for the first time will be required to complete the Child tax credit form application, TC600. Parents will have to give details of all the income for the previous tax year along with the national insurance and Child Benefit numbers. In-case of an issue with the child tax credit form/procedures, parents can refer to the notes that come with it, or call the Tax Credits Helpline, or get advice from an adviser.

Child Tax Credits Helpline Number:

The main telephone number is the child tax credit helpline is: 0345 300 3900 (textphone 0345 300 3909). From abroad, you can ring +44 2890 538 192 for child tax credit help regarding child tax credit form, procedure and more issue.

Mondays to Fridays, the Child Tax Credits Helpline is open from 8am-8pm, on Saturdays 8am-4pm and on Sundays 9am -5pm. (It is closed on Christmas Day, Boxing Day and New Year’s Day).

Changes to Child Tax Credits

From April 2017, to make a new Child Tax Credit claim, there are plans to limit support to the first two children. Families / parents will no longer be able to claim the family element but will still be able to claim the disabled child premium for any of the children who are eligible to get it. For families which are already claiming CTC and have more than two children won’t be affected by the changes. You can have the complete details by calling on the child tax credit free number 0345-300-3900 for all the information on forms & changes required.

Tax Credits to be Replaced by Universal Credit

Tax credits seem to be phasing out and will soon be replaced by Universal credits. This new benefit will be introduced in stages over the next few years. Essentially, the new Universal Credit will be given as a single payment every month and will include standard allowance plus other elements such as childcare, children, and housing. Hence, the amount an individual will get will depend on their circumstances. Currently, an individual will only need to claim universal credit as an alternative of tax credits if:

  • An individual starts to live with a partner who already receives Universal Credit
  • An individual looses the job and is residing in an area where Universal Credit is being introduced

From April 2017, for making a new claim for Universal Credit, there are policies to limit support to the initial two children and the first child premium may no longer be available.

CTC Payment

CTC can be paid directly into the building society account or the bank, or into a post office card account. Parents can choose to have it paid weekly or monthly.

Your Partner – DNS Accountants

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