FIS: Tax Credits

Over 6 million families in Britain are entitled to Tax Credits. They are managed by the Tax Credit Office, part of Her Majesty’s Revenue and Customs (HMRC). Tax Credits are designed to top up wages for those on low income and help with childcare costs. This factsheet is designed to help you understand more about Tax Credits.

Child Tax Credit (CTC)

Parents can receive help towards the general cost of bringing up children. This is called Child Tax Credit (CTC). You do not need to be working to claim CTC.

Families with incomes of up to £59,000 may be eligible for some help. This income level rises to £66,000 for those families with a child under the age of one.

CTC is available to people responsible for one or more children, or young people under 20 years of age in certain types of training.

There are five potential elements of CTC you may be entitled to, please see the download the table for further information.   

Working Tax Credit

Working Tax Credit (WTC) is available to eligible people who work more than 16 hours per week. Extra help is available for working parents to assist with the cost of registered or voluntary registered childcare – this is called the Childcare Element of WTC.

For more information of registered or voluntary registered childcare contact Wirral’s Family Information Service.

Childcare Element

Families using registered or voluntary registered childcare may be able to get some of the costs back through WTC, depending on how much they earn.

You can receive up to 80% of your childcare costs back, but remember you can only claim for £175 per week for one child’s childcare or £300 per week for two or more children.

So, if you have one child in childcare costing you £175 per week you could receive up to £140 per week back, or with two or more children in childcare costing you £300 per week you could receive up to £240 per week back.

To be eligible for the Childcare Element of WTC, you must either be a lone parent working 16 hours or more per week or a couple where both partners are working 16 hours or more per week, unless one partner is incapacitated, in hospital or in prison.

A claim for WTC or the Childcare Element will be affected by using Childcare Vouchers.

You cannot receive the Childcare Element of WTC for childcare costs that are covered by Childcare Vouchers. This applies even if your pay is reduced (salary sacrifice) in order to receive the vouchers.

• If you use Childcare Vouchers you must take the amount of the vouchers away from your total cost of childcare.
• The amount you receive in Childcare Vouchers does not count as income.

It is important to note that generally families who are receiving Tax Credits at a level greater than the Family Element will not gain from the tax and National Insurance savings that can be made from using Childcare Vouchers.

Generally families who are receiving Tax Credits at the Family Element or less will gain from using Childcare Vouchers.

It is important to check beforehand if you would benefit more from WTC or Childcare Vouchers before taking up either.

How to apply for WTC or CTC or get more information

There is one single application form to complete to apply for both WTC and CTC. When you fill out your application form you will automatically be applying for both even though you may not be entitled to both. Single people must claim on their own whereas couples must claim as a couple, with both names taken into account.

To get a form you can:

• Ring HMRC on 0845 300 3900.
• Pick up a form from your local Jobcentre Plus office.
• Visit or ring your local HMRC Enquiry Centre - you can find details about your local HMRC Enquiry Centre by logging on to www.hmrc.gov.uk/enq/main.htm

HM Revenue and Customs helplines are open between 8.00am and 8.00pm seven days a week (except Christmas Day, Boxing Day, New Year’s Day and Easter Sunday).

When you phone HMRC you will need to give them some details about yourself. They will ask you for:

• Your income details (and those of your partner, if you have one) for the previous tax year, and
• Your National Insurance number (and that of your partner). It looks like this AB123456C.

If you think you might be eligible to claim CTC or WTC you can go on line to check at www.hmrc.gov.uk/taxcredits/calculator.htm

Or use the Daycare Trust Tax Credit Checker at www.payingforchildcare.org.uk.

Or ring the Daycare Trust information line on 02079 40 7510.

Or ring the Daycare Trust information line on 02079 40 7510 to see if you will qualify.

Frequently asked questions

Do I have to be working to claim Child Tax Credit?

No, you do not have to be working to claim Child Tax Credit.

How many children can I claim for?

You can claim for as many qualifying children as you are responsible for.

Is Child Tax Credit the same as Child Benefit?

No. They are two different things. Child Tax Credit is paid in addition to Child Benefit.

How often will I receive Tax Credits?

You can choose to receive payments weekly or every four weeks.

Who receives Tax Credits if I’m part of a couple?

Tax Credits are usually paid directly to the main carer for all the children in the family. However you can inform HMRC who you want the payments to go to.

How is Tax Credit paid?

Tax Credits are normally paid into your bank or building society account or a Post Office card account.

What if I have a new baby?

You should inform HMRC as soon as you can, they will not be aware of this unless you tell them.

You will then receive a higher rate of Child Tax Credit, which HMRC will pay for a year from the child’s birth

What happens if I change or stop my childcare arrangements?

As soon as any changes occur you must call HMRC on 0845 300 3900 and they will work out your childcare situation with you.

Will you have to pay back Tax Credits you have already received?

New rules mean that you are far less likely than in the past to receive more Tax Credits than you are entitled to (and have to pay them back).

Repayments can happen because Tax Credit awards are at first provisional and are finalised only after the end of the tax year. The system works like this, each year your Tax Credits award is based on your circumstances at the time of the claim and an estimate of your current income which is initially assumed to be the same as last year’s. The award is reviewed and finalised after the end of the year once you know your actual income and circumstances for the year.

If your income has fallen or your circumstances changed during the year meaning that you are entitled to more Tax Credits, you will get a back-payment of extra credits.

If your income has risen or your circumstances changed so that you were paid too much, you might have to pay back some of the Tax Credits you have received. But your income can now increase by up to £25,000 compared with last year before it will affect your award – see example overleaf.

You can ask to have your claim reviewed during the year to reflect changes in your income or circumstances, so that your Tax Credits are increased or reduced immediately. There are some changes that you must report immediately – for example, starting to live with someone or ceasing to be a couple, and changes to your eligible childcare costs of more than £10 per week.

I am not a UK National but I do live in the UK. Can I claim for Tax Credits?

You do not need to be a UK National to claim for tax credits. You should still complete and submit a tax credits claim. Telephone the Helpline to request a claim form on 0845 300 3900.

I have ‘no recourse to public funds’ stamped on my passport. Am I entitled to Tax Credits?

Generally, no. However, there are exceptions to this rule. For example, if you are married to, or have a partner who has no limitation on his or her leave to remain in the UK, you may be entitled to tax credits, providing you satisfy all the other qualifying criteria.  

The Home Office has produced a leaflet outlining what they class as recourse to public funds, which you may find helpful. A copy of that guidance can be found on the Home Office Border & Immigration Agency’s website ? www.ind.homeoffice.gov.uk  

I have been outside the UK for more than 8 to 12 weeks. Can I still claim for my childcare costs?

As you have been outside of the UK for longer than 8 to 12 weeks you no longer qualify for tax credits. If you do not satisfy the conditions of entitlement to tax credits you can no longer claim for help towards your childcare costs.

If you are part of a couple and your partner remains in the UK whilst you are abroad for longer than 8 to 12 weeks, they should make a single claim for tax credits and they will be able to claim help towards relevant childcare costs if they satisfy all the other WTC entitlement conditions as a single claimant.