Working and Child Tax Credits

The main features of the tax credits are:

1. Child tax credit

•  Eligibility is assessed on household income.

•  The claimant must be responsible for one or more children aged 16 or under, or at least one child under age 20 and in full-time non-advanced education.

•  The family element of the tax credit is £545 per annum and is doubled in the first year of a child's life.

•  The child element is £2,235 per annum for each child.

•  The disabled child element is £2,670 per annum (where relevant).

•  HMRC will pay the CTC to the main carer for the child.

•  Working tax credit

•  The claimant, or one of the joint claimants, must be in qualifying remunerative work.

•  The amount of WTC will be based on circumstances which are primarily the number of hours worked and the income of the claimant (or joint income for a couple).

•  The age and working hours conditions are not straightforward. Generally, the minimum weekly working requirement will be:

a) 16 hours for families with children and workers with a disability. The claimant can be aged 16 or over.

b) 30 hours for workers with no children and no disability. The claimant has to be aged 25 or over.

•  The basic element of the tax credit is £1,890 per annum.

•  The couple or lone parent element is £1,860 per annum.

•  A 30 hour element of £775 per annum is payable where the claimant or one of the claimants works at least 30 hours a week (couples with children may aggregate their hours for this purpose).

•  A disabled worker element of £2,530 per annum or more is available where the claimant, or his or her partner, has a disability.

•  There is 50-plus element and a childcare element, worth 80% of care costs, subject to an eligible maximum of £300.

•  For employees, payment will normally be made by their employer with their wages (except the childcare element which is paid direct to the main carer). For the self-employed, payment is made directly by HMRC.

3. Calculating the credits

It is necessary first to total the various elements available to arrive at the maximum available amount of tax credits before any reduction on account of income. All elements can be reduced at the rate of 39% (ie 39p per £1 of income), except the family element of CTC which is reduced at a rate of 6.67%.

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The contents of this Bulletin are based on the proposals put forward by the Chancellor in his Budget speech and explained in documents subsequently published by HMRC and the Treasury.
All Budget proposals may be subject to change before the Finance Act is passed. References to spouse, husband and wife and married couples include references to registered civil partners and civil partnerships.
This Bulletin is provided for general consideration only and no action should be taken or refrained from based on its contents alone. Accordingly, no responsibility can be accepted for any loss occasioned as a result of any such action or inaction.
Professional advice must always be taken.

This news item is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as at July 2008. No action must be taken or refrained from based on its contents alone. Accordingly no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.

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