Tax Credits and Child Benefit Explained for Dummies

- by Becky Hall
A Guide to the Welfare System in the UK – Chapter 3 Part I

In this chapter, we look at the help which families can receive from the state. There are two types of benefits for families with children; Child Benefits and Tax Credits. We will look first at child benefit, such as who is eligible, how to claim it and how much you will receive.

If you are working, you can also receive Tax Credits. There are two types of tax credits; one for families with children called Child Tax Credits, and Working Tax Credits. You can find out here exactly which type of tax credits you should apply for. We will also discuss how much you can receive, how to apply and receiving tax credits when you have stopped working.

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Child Benefit

Here’s what you need to know about Child Benefit
  • Child Benefit is paid if you are responsible for a child under 16 (or 20 in approved education/training.)
  • It is £20.70 per week for the first child and £13.70 for each additional child.
  • The government will pay it into a bank account every month or week, but only one adult can receive it.
  • It continues until the child becomes financially independent or leaves education/training.

Since 2018, you are only entitled to child benefit for the first two children. After that, you don’t get anything for any of your other additional children. For the children you are entitled to get child benefit for, you must be responsible for and under 16. You are also entitled if your child is under 20 and in full-time education or receiving approved training. Those who receive the benefit are usually living with the child. But, it is possible to get the benefit if you are paying the same amount as Child Benefit in your contributions towards the child. That means that you are investing money, clothes, presents, etc. in the child. However, only one parent or guardian will take the money.

How much will you receive in Child Benefit?
The Eldest/Only Child£20.70 per week
The Second Child £13.70 per week
Any Additional Child £0

How To Claim For Child Benefit

If you are eligible for Child Benefit, you should fill in the Child Benefit Claim Form CH2. Send it to the Child Benefit Office with the child’s original birth certificate.

Send your claim for child benefit to:
Child Benefit Office
Newcastle-upon-Tyne NE88 1ZD

Any new claim takes up to 12 weeks to process. Claims can be backdated for up to 12 weeks. So, make sure that you apply as soon as your child is born, so you do not miss out on any payments. Having a baby can be an expensive time and often people end up taking little loans online to help get through this time. Once payments begin, the money will be transferred into your bank account every four weeks, usually on a Monday or Tuesday. If you are a single parent or receiving other state benefits such as Income Support, then you can arrange to have the money paid on a weekly basis.

You stop receiving Child Benefit when your child:

  • Starts paid work of more than 24 hours a week
  • Begins an apprenticeship
  • Begins receiving benefits in their own right such as Income Support.

If your child is 16 or 17 and leaves education/training, registers with the Armed Forces or a government-sponsored careers service, then you will continue to receive Child Benefit for a further 20 weeks.

It is vital that you let the Child Benefit Office know of any changes in your or your child’s circumstances. There are fines for making fraudulent claims.

child tax credits - cashfloat

Tax Credits

Here’s what you need to know about Tax Credits
  • Tax Credits are a means-tested mechanism to distribute income to low earners and are intended to stop welfare dependency.
  • There are two kinds of Tax Credits: Child Tax Credits (CTC) and Working Tax Credit (WTC).
  • You are entitled to Child Tax Credits if you are responsible for a child under 16 or under 20 if they are in approved education/training.
  • CTC is paid into your bank account on a weekly or monthly basis until April 5th (when you must renew your claim) and only one household can receive it for a child.

Tax Credits were introduced into the UK benefit system in April 2003 and are a means-tested state mechanism to distribute income to people on lower wages. The idea behind Tax Credits is to lift people out of welfare dependency and encourage them to work. The problem before Tax Credits was that as soon as claimants found a job, even if it was part-time and/or poorly-paid, they found that their benefits were cut, so there was no incentive to work. Tax Credits are a way to stop penalising people for working.

You may be eligible for Tax Credits if you earn:
IndividualUnder £14,000 per year
CoupleUnder £19,000 per year
Couple with ChildrenUnder £40,000 per year

The amount you will receive in tax credit depends on;

  • How old you are
  • The number of hours you work
  • The amount of children you have
  • Whether you apply as an individual or as a couple.

child tax credits - cashfloat

There are two kinds of Tax Credits: Child Tax Credits (for families with children) and Working Tax Credits (for workers on low incomes, with or without children.)

Child Tax Credits (CTC)

You are entitled to Child Tax Credits if you are responsible for a child under 16 or if you have a child under 20 who is in approved education or training. There is no set limit for your income as it depends on your circumstances and that of your partner. On the website, there is a Tax Credit calculator, which can give you an idea of how much you will receive. Only one household can receive CTC. So, if you separate from your partner or spouse and you cannot agree with your former partner about who should receive it, the Tax Credit Office will decide for you when you both apply. You can receive CTC even if you are out-of-work.

How much will you receive in Child Tax Credits:
‘Family element’ (flat payment)£546 per year
For each childUp to £2,780 per year (on top of the flat rate)
For a disabled childUp to £3,140 per year (on top of the child payment and flat rate)
A severely disabled childUp to £1,275 (in addition to other elements)

Changes in CTC from April 2017

You will only be able to receive CTC for over 2 children if they were born before April 2017.

How To Claim For Child Tax Credit

You can claim for child tax credit at any time of the year. You should contact the Tax Credit Office by phone (0345 300 3900) or online, and they will send a form to you. This form takes about two weeks to arrive, and the processing of your claim will take a further five weeks. If you are already claiming, you should call the helpline to renew your claim.

Child Tax Credit is paid every week or month into your bank account to the end of the tax year (5th April). You should notify the Tax Credit Office of any changes in your circumstances. This could lead to a change in the amount you receive.

You can receive an increase in Child Tax Credit if;

  • Your income goes down by £2,500 or more
  • One or more of your benefits stop or are reduced
  • You have another child or your childcare costs go up.

However, your Child Tax Credit could be reduced or even stopped if;

  • Your income goes up by £2,500 or more
  • You do not renew your claim
  • The benefits office mistakenly paid you too much, or you claimed too much in benefits
  • Your child of 16, 18 or 19 leaves approved education/training
  • You apply for Universal Credit.
child tax credits - cashfloat

Working Tax Credit (WTC)

Here’s what you need to know about Working Tax Credits
  • You are eligible for Working Tax Credit if you work at a low-paid job, aged 16-24 and have a child or disability or be over 25 with or without children.
  • You must work a certain number of hours per week depending on your circumstances and receive an income below a certain level.
  • The application form is sent to the Tax Credit Office, and you should keep all financial records for three years.
  • You should let the Tax Credit Office know of any changes in your circumstances. In some cases (such as maternity leave) when you are not working, the WTC will continue to be paid for a certain period.

You are eligible for Working Tax Credit if you are;

  • Aged 16-24 years old working at a low-paid job and have a child and/or a disability. OR
  • Over 25 and on a low income (either with or without children.)

In addition to these requirements, you must;

  • Work a certain number of hours (which can vary by circumstance – see table below)
  • Expect to be paid for your work
  • Have an income under a certain level.

The number of hours you should work per week in order to be eligible for working tax credits depends on your circumstances and your age. You can find out how many hours you must work in the table below.

How many hours must I work to be eligible for Working Tax Credits?
AgeAmount of Hours You Must Work
25-59At least 30 hours
60 or over16 hours
Disabled16 hours
Single with 1 or more children16 hours
Couple with 1 or more children24 hours between the two of you (or one of you working at least 16 hours).

How To Claim For Working Tax Credit

The claims procedure for Working Tax Credit is the same as Child Tax Credit. In fact, you can use the same form if you wish to apply for them both. You should contact the Tax Credit Office (by phone or online) for the form, which will arrive within two weeks. The new claim will take five weeks to process, and the money will be paid into your bank account every week or month.

How much will I receive in Working Tax Credits?
Basic WTC £1,960 (more or less according to your income or circumstances)
Couple applying togetherUp to £2,010
Single parent Up to £2,010
Work at least 30 hours £810
Claimant with disability £2,970
Claimant with severe disability £1,275 (usually on top of disability payment)

You will need to supply the Tax Credit Office with your National Insurance number and your income for the previous tax year. Also, you should keep records of your income, bills, payslips, benefits, tax credits, childcare costs and children’s education for the previous 3 years.

You should let the Tax Credit Office know of any changes in your circumstances within 30 days in case your payment needs to be adjusted up or down.

child tax credits - cashfloat

Did you know that even if you are not working, you can continue receiving WTC for a certain number of days or weeks according to your circumstances? These include:

Receiving Working Tax Credits when you stop working:
You lose/leave your job 4 weeks
Maternity leaveFirst 39 weeks of leave
Off work sickFirst 28 weeks
On strikeUp to 10 days
Laid off4 weeks

You should contact the Tax Credit Office to let them know if you are not working; do not miss out on something you are entitled to.

FAQs about Tax Credits

Should I fill in the Child Benefit claim form even if I don’t intend to receive it?

Even if you do not expect to receive Child Benefit, you ought to fill in the claim form. Not only will you receive National Insurance Credits which will count towards your state pension but your child will be registered to get a National Insurance number at the age of 16.

Can I receive both Child Tax Credit and Working Tax Credit?

Yes, if you are on a low income and in work, it is possible to receive both Child Tax Credit and Working Tax Credit.

Can I receive both Child Tax Credit and Universal Credit?

No, as soon as you apply for Universal Credit, your Child Tax Credit will be stopped because Universal Credit covers a range of different benefits.

How soon should I let the Tax Credit Office know of any changes in my circumstances?

Ideally, you should let them know as soon as possible. You could be missing out on money you are entitled to if you do not. Also, if your change in circumstances means that your CTC has to be reduced, you can be fined up to £600 if you do not report this to them within 30 days. The last thing you need is to have to take a text loan to pay off your fine!

Am I entitled to Working Tax Credit if I am self-employed?

In some circumstances, you are entitled to WTC if you are self-employed. However, your business must be commercial, regular and profitable. Also, you must keep business records and follow any regulations applicable to your profession. For example, you should have the right licence, insurance, etc. If your average hourly profit is less than the National Minimum Wage, you may be asked to provide proof of your business practices (such as a business plan or evidence of how you have promoted your business).

Bringing up children is never cheap. In fact, the Money Charity estimates that it cost about £30.23 per day to bring up a child to the age of 21. These child benefits and tax credits are designed to help families with children to cope with the high expenses associated with child rearing.

Of course, it is sometimes easier and faster to simply apply for payday loans online. But, like most things, the more convenient something is, the more it costs. Trying to bring up your children using just short term credit as your source of quick money uk, is a bit like doing all your shopping at the local convenience store. Very convenient, very easy, but very expensive.

So although it might be confusing, (although I that you are a bit more clear on which benefits you can now claim,) it is worth putting in the effort to claim the correct benefits. In the long run, your hard work will pay off.

Making life problems simpler for British families - Cashfloat Making life problems simpler for British families - Cashfloat
About The Author
Becky Hall
Becky never thought she would be a financial blogger. But Fate arranged that Becky had to put her accounting degree on the back burner right after she graduated with a first in Business and Accounting. While doing bookkeeping as a freelancer for private clients, Becky noticed how many cashflow problems can be solved with a little bit of education. Trying to keep her clients out of debt, Becky began writing resources which she distributed to clients. What began as writing advice for clients evolved into a passion and now Becky found her platform at Cashfloat. When she isn’t writing, calculating or budgeting, Becky can be found at her piano playing something classical.
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