Child Tax Credit and Working Tax Credit

Summary
The new Child Tax Credit will be a system of income-related support for families with children, and is available for families with incomes up to £58,175 (up to £66,350 if you have a child under one). This is in recognition of the costs of parenthood borne by both low and middle income families. The Child Tax Credit will be paid to the main carer, and can be spent on the child/ren in any way that the carer chooses.

The new Working Tax Credit will be a system of providing a targeted top-up to wages for those in lower-paid jobs (both with and without children), ensuring that work pays more than welfare. The Working Tax Credit will include a specific childcare element, which will pay up to 70% of childcare costs for those with children in receipt of this credit.

Context
From April 2003, the new Child Tax Credit and Working Tax Credit will be introduced to replace the existing Working Families? Tax Credit, Disabled Person?s Tax Credit and Children?s Tax Credit.

These new Tax Credits are part of the fundamental changes to the tax and benefits system announced by the Chancellor in the 2000 Budget, and are designed to provide more generous levels of support for families and those in lower paid work.

Child Tax Credit
The Child Tax Credit will incorporate the child elements of Working Families? Tax Credit, Disabled Person?s Tax Credit and the Children?s Tax Credit. From 2004, it will also incorporate elements from Income Support and Jobseeker?s Allowance, thereby bringing all income-related support for children into one seamless tax credit system.

Child Tax Credit is payable regardless of work status. Families on incomes of up to £58,000 per year can benefit from Child Tax Credit. In this context, 9 out of 10 families with children will be eligible for Child Tax Credit. There is also a higher payment available for families with at least one child under one year old (the baby element), and for families with children with a disability.

Child Tax Credit will be paid direct to the main carer, and is designed to provide a single income-related framework of support for families with children, based on having responsibility for a child.

Child Tax Credit will be paid in addition to Child Benefit. The Government is committed to Child Benefit remaining universal, and this will continue to be paid to the person responsible for the child/ren in the family.

To see more information, or to apply online, visit: www.Money2Mummy.co.uk! a very user-friendly website from the Inland Revenue.

Working Tax Credit
Main Principle
The Working Tax Credit will provide a targeted top-up to wages for those in lower paid jobs, ensuring work pays more than welfare. It will incorporate the adult elements of Working Families? Tax Credit and Disabled Person?s Tax Credit as well as the Employment Credit element of the New Deal for those aged 50 or more.

This single tax credit will provide extra help through the tax system to those in lower paid work. The amount a person will be eligible for will depend on their circumstances (e.g. higher amounts will be available to workers with a disability).

The main element of the Working Tax Credit ? the targeted top-up to wages ? will generally be paid through the pay packet for employees, and direct for the self-employed.

The Working Tax Credit supports those with dependent children and/or a disability if they work at least 16 hours per week. It also extends support to those without children/a disability provided they are at least 25 years of age and work at least 30 hours per week.

Childcare Element
The Working Tax Credit includes a specific element to support the cost of registered childcare for working parents. To apply for the childcare element, lone parents must work 16 hours or more. Couples can apply if:

Both work 16 hours or more; or
One works 16 hours or more per week and the other receives a disability benefit or an invalid carriage because he or she has a disability.

This childcare element will be paid direct to the main carer, alongside the Child Tax Credit. The childcare element in the Working Tax Credit will pay up to 70% of eligible childcare costs up to a maximum of £135 per week for one child (equal to a credit of up to £94.50 per week) and £200 per week for two or more children (equal to a credit of up to £140 per week).

The childcare element of the Working Tax Credit will be available to families with incomes over the threshold (currently at £5,060), but will be reduced at the rate of 37p for every pound of gross income over the threshold. In this way, the childcare element of the Working Tax Credit payable decreases proportionately as a family?s income increases.

Childcare costs eligible for the childcare element include payments to:

Registered childminders, nurseries, play schemes or out of school clubs
Certain schools or other establishments exempt from registration
Providers of childcare for children aged 8 or over, which are approved by specifically accredited organisations
From April 2003, approved in the home carers

From the table below you will see that CTC is available to families with quite high joint incomes so it is well worthwhile claiming especially when the effect of the 1% increase in National Insurance contributions becomes effective on the same date.

Gross annual joint	One Child		Two Children		Three Children
income	Annual	Weekly	Annual	Weekly	Annual	Weekly
£5,000	£1,900	£38.00	£3,435	£65.70	£4,880	£93.30
£10,000	£1,90	£38.00	£3,435	£65.70	$4,88	£93.30
£15,000	£1,335	£25.50	£2,780	£53.20	£4,225	£80.40
£20,000	£545	£10.40	£930	£17.80	£2,375	£45.40
£25,000	£545	£10.40	£545	£10.40	£545	£10.40
£30,000	£545	£10.40	£545	£10.40	£545	£10.40
£40,000	£545	£10.40	£545	£10.40	£545	£10.40
£50,000	£545	£10.40	£545	£10.40	£545	£10.40
£60,000	£0	£0	£0	£0	£0	£0

In order claim it is necessary to complete a claim form which is available by calling 0800 500 222 or by logging on to www.inlandrevenue.gov.uk/taxcredits.

When claiming you should state the name of the nursery or after-school club and provide its Ofsted number.

For further advice the Inland Revenue Helpline number is 0845 300 3900 or you may text 0845 300 3909

There is also a Disabled Persons Tax Credit Helpline 0845 605 5858