Child Tax Credit | Working Tax Credit | Complete Guide to Tax Credits | Helping families save
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Child Tax Credit & Working Tax Credit
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Child Tax Credit/Working Tax Credit
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Working Tax Credit / Child Tax Credit
Understanding how your entitlement to Working Tax Credit and Child Tax Credit is calculated isn’t overly easy. Luckily, the calculations are all done for you with the information you provide when you apply.
The best way to understand how is to understand why. So in this guide, we’ll try to give you some idea of the logic behind the system and some step-by-step examples.
You can be eligible for Child Tax Credit on its own (if you have children who are eligible for Child Benefit but you don’t work), or combined with Working Tax Credit (if you work 30+ hours per week). If you don’t have children, but you are over 25 and work 30+ hours per week, you may be eligible to claim Working Tax Credit. 
Age of the child
You can claim up until the child's 20th birthday as long as they are in full time education (higher education such as university doesn't count). Be sure to tell the tax office if the child is continuing in education as Child Tax Credit will usually stop after the 1st September following their 16th birthday.
Backdating
Child Tax Credit and Working Tax Credit can usually only be backdated for a month. Child Benefit can usually be backdated for 3 months.
If I adopt or foster a child, can I receive Child Tax Credit?
You can claim Child Tax Credit for your adopted or foster child if you’re not getting money from your local authority or Health and Social Services Board.
How do I get Child Tax Credit?
It’s not about being the biological parent of a child, it’s about being responsible for a child to the extent that they live with you and you pay for their meals. It’s not about who contributes the most financially; paying child maintenance won’t make you eligible to receive Child Tax Credit if the child lives elsewhere. If the child lives with you and somewhere else in reasonably equal shares you might find it difficult to decide who should receive the Child Tax Credit. In these cases, the Tax Credit Office can make the final decision for you.
What’s key is that you can claim for Child Tax Credit regardless of whether you work or not. You just need to be responsible for a child who is eligible (under the age of 16 or up to 20 if they’re in full time education or registered with the Careers Service) for Child Benefit.
Income guidelines/limits
We call them income guidelines because they are a good rule-of-thumb for the amount that you can get in tax credit in proportion to your income. (if you have a child, but you and your partner work less than 16 hours a week), working tax credit (if you’re over 25 and over 30+ hours a week) or working tax credit + child tax credit (if you have a child and you work 30+ hours a week). For instance, if you are single without children, £13,000 will generally be the upper limit to receiving tax credit.
Situation Probable income limit
You have one child £26,000
You have two children £32,200
Single without children £13,000
Couple without children £18,000
Remember that these are not set-in-stone (hence why we are calling them guidelines). For some families the income limit will be far higher where certain circumstances mean that they are entitled to additional elements. This is why entitlements of Child Tax Credit and Working Tax Credit are separated into different ‘elements.’ These separate elements 'bolt together' to form your total entitlement, which is then reduced in proportion to your income to give you your actual entitlement. This means that elements can be easily factored in depending on a family's circumstances. Perhaps you, your partner, or your child suffer from a disability, or maybe you pay for childcare from an approved provider. The amount that you may receive increases because in this case you'll be entitled to more ‘elements’ (in this case, the disability and childcare elements) than a family with different circumstances. In other words, your income can be higher than the probable income limit and you'll still get tax credit.
Elements of Child Tax Credit
Elements What it is   Max yearly amount
Family (basic) element Basic payment if you qualify for Child Tax Credit

  £545

Child Paid on top of the basic element for each of your children

  £2,690

Disabled child Paid for each disabled child

  £2,690

Severely disabled child Pain on top of the disabled child element for each severely disabled child

  £1,190

If your income is over £15,860 the amount you qualify for is reduced in a certain order. The child element, including extra payments for a child’s disability are reduced first at a rate of 41%. The basic family element is only reduced if your income is sufficiently large to reduce the child elements to nil.
example
You qualify for Child Tax Credit, but not Working Tax Credit
Let’s go through some examples to help you understand how the ‘elements’ of child tax credit and working tax credit are used along with your income and working hours to calculate your tax credit. 
Let’s say you have one child and your joint income is £19,000 per year. Before we work out the reductions, your entitlement would be as follows:
Basic family element - £545
Child element - £2,690
So, our starting total is £3,235
At 19,000, you income is higher than the £15,860 limit so we reduce it using the following steps:
Step 1
The child element is reduced first at a rate of 41 per cent. In other words, we’re going to work out 41% of the ‘excess’ income and then subtract that from the child element.
Take £15,860 away from £19,000.
£19,000 - £15,860 = £3140
Step 2
Now we need to subtract 41% of the excess from the child element.
So, calculate 41% of £3,140
£3,140 divided by 100 and then multiplied by 41 = £1,287.40
Step 3
Subtract this figure away from the child element of £2,690.
£2,690 - £1,287.40 = £1402.60
So, now you have the reduced amount of the child element that you’re entitled to, we just need to add the family element to get your final entitlement.
Step 4
You may remember that the basic family element is only reduced if your income is sufficiently large so that when set against your total possible entitlement, your actual entitlement is reduced to zero. The calculation tells us that if you earn £19,000 a year your child tax credit will be reduced by £1,287.40, from the total amount you can receive (if your income was below £15,860) from £2,690 to £1402.60. We now add the family element of £545, which is not reduced because you’re still entitled to an amount of the child element. 
So,
the reduced amount of the child element - £1,402.60
plus the family element - £545
This gives a total figure of: £1947.60 for a gross income of £19,000
example
You qualify for Working Tax Credit AND Child Tax Credit
The income threshold for Working Tax Credit is far lower, but the manner of calculating your entitlement is the same.
You and your partner have a child and your joint income is £19,000 per year. You also work for over 30 hours a week.
Before we work out the reductions, your entitlement would be as follows:
Working Tax Credit
Working Tax Credit basic element - £1,920
Working Tax Credit couple element - £1,950
Working Tax Credit 30 hour element - £790
+ Child Tax Credit
Child Tax Credit family element - £545
Child Tax Credit child element - £2,690
So, our total starting tax credits (before the deductions we are about to calculate) total is £7,895
At £19,000 (we calculate using the gross income – pre tax and National Insurance), your income is higher than the £6,420 limit. The reduction to your credit is calculated in the following way:
Step 1
We’re going to work out 41% of the ‘excess’ income and then subtract that from our total starting tax credits.
Take £6,420 away from your income of £19,000
£19,000 - £6,420 = £12,580 (This figure is your excess)
Step 2
Now we need to subtract 41% of the excess from the child element.
So, calculate 41% of £12,580
£12,580 divided by 100 and then multiplied by 41 = £5,157.80 (this is 41% of £12,580)
Step 3
Subtract this figure away from your total tax credits of £7,895 (this was the combination of child tax credit and working tax credit -
So, £7,895 - £5,157.80 = £2,738
This gives a working tax credit/child tax credit total of £2,738 for a gross income of £19,000.
cot
Childcare Element of Working Tax Credit
You can receive back up to 70% of your childcare costs if the care is provided from a registered or approved childcare, but you must be work over 16 hours a week as either a single person, or between a couple (i.e 8 hours each) to claim. Your household income typically needs to be below £32,200 to be eligible, but some households can still get payouts where there are many children, disabled children or either you or your partner has a disability.  The best thing to do is to check by ringing the tax credit helpline number on 0345 300 3900. You’ll be pleased to know that this 0345 number will be charged at a local rate, even if you call from your mobile.
The childcare element is kept as an element of Working Tax Credit as its purpose is to give an incentive to those who choose to work where the cost of child care would normally make it more affordable to stay at home. The money is paid to the recipient of the Child Tax Credit, who may or may not be the applicant for the childcare element of Working Tax Credit. This might seems a little odd, but it makes a lot more sense when you consider that it is a system that prioritises the financial needs of the child where the parents are separated or divorced.
The important thing to remember is that the childcare in question must be registered and approved; you cannot pay yourself for the care that you give a child, nor a friend or relative (unless they happen to work as an approved child minder). It does however mean that ‘childcare’ may still be claimed where the care in question is a summer school or camp, if it is approved and registered. 
How is childcare paid?
The money is paid directly into the bank or building society account of the person responsible for the child in question. You can claim for up to 70% of your childcare costs. The maximum payout for a single child is £122.50 a week or £210 a week for two or more children.
example
To avoid confusion, let’s run through the previous example for Working Tax Credit + Child Tax Credit combined, with the Childcare costs added in:
Let’s say that you pay for childcare from an approved provider. 
Your childcare costs are £100 per week. You can claim 70% of your total costs.
So, 70% of £100 x 52 weeks = £3,640
This figure is now added into the calculation for child tax credit/working tax credit combined.
You and your partner have a child and your joint income is £19,000 per year. You also work for over 30 hours a week.
Before we work out the reductions, your starting entitlement would be as follows:
From Working Tax Credit
Working Tax Credit basic element - £1,920
Working Tax Credit couple element - £1,950
Working Tax Credit 30 hour element - £790
Childcare 70% of £100 x 52 = £3,640
+ Child Tax Credit
Child Tax Credit family element - £545
Child Tax Credit child element - £2,690
So, our total starting tax credits total is £11,533. This is the figure we start out with before your income and working hours are used to reduce it down to the amount you actually receive. Now let's work through how this is done in the following steps:
At £19,000 (we calculate using the gross income – pre tax and National Insurance), your income is higher than the £6,420 limit so the reduction to your entitlement is calculated like this:
Step 1
We’re going to work out 41% of the ‘excess’ income and then subtract that from our total starting tax credits. 
Take £6,420 away from your income of £19,000
£19,000 - £6,420 = £12,580 (this figure is your excess)
Step 2
Now we need to subtract 41% of the excess from the child element.
So, calculate 41% of £12,580
£12,580 divided by 100 and then multiplied by 41 = £5,157.80 (this is 41% of £12,580)
Step 3
Subtract this figure away from your total tax credits of £11,535 (this was the combination of child tax credit and working tax credit + the childcare element of Working Tax Credit.
So, £11,535 - £5,157.80 = £6377.20
This gives a working tax credit/child tax credit (including the childcare element) total of £6,377.20 for a gross income of £19,000
example
You only qualify for Working Tax Credit
This is calculated in the same manner as for Child Tax Credit, but the amount you’ll receive if you earn over £12,000 (as a single person without children) is small. Unlike Child Tax Credit, where income above £15,860 is counted as excess income for the purposes of calculating your tax credit, with Working Tax Credit, income above £6,420 is counted as excess. If you don’t have children, you must be over 25 to claim.
For many KidStart users using this guide, only the Child Tax Credit or Working Tax Credit/Child Tax Credit conjunction will be relevant, but for completeness, here’s an example of the calculation:
You’re single with no children and you work over 30 hours a week and earn £9,000 a year.
Before we work out the reductions, your entitlement would be as follows:
the basic element of £1,920
the 30 hour element of £90
So, our total starting tax credits (before the deductions we are about to calculate) total is £2,710
At £9,000 (remember to use your gross income, i.e - pre tax and National Insurance), your income is higher than the £6,420 limit so the reduction to your entitlement is calculated thus:
Step 1
We’re going to work out 41% of the ‘excess’ income and then subtract that from our total starting tax credits.
Take £6,420 away from your income of £9,000
£9,000 - £6,420 = £2,580 (this figure is your excess)
Step 2
Now we need to subtract 41% of the excess from the child element.
So, calculate 41% of £12,580
£2,580 divided by 100 and then multiplied by 41 = £1,057.80 (this is 41% of £2,580)
Step 3
Subtract this figure away from your total starting tax credits of £2,710.
So, £2,710 - £1,057 = £1,653
This gives a working tax credit of  total £1,653 for a single person with no children working over 30 hours a week for a gross income of £9,000.
Your Circumstances Change
Make sure that you tell the tax office about anything that may impact your tax credits. Because your payments are estimated from your earnings from the previous year, you’ll either be overpaid or underpaid if your circumstances change.
In most circumstances, you’ll have to pay back an overpayment and you might get a fine of £300.
You must tell them the following:
Change in status: You move in with a partner, get married, or leave the UK for longer than 8 weeks.
Drop in working hours: You stop working or your hours drop below your threshold.
Change in childcare: If your childcare costs go down or your child leaves home.
Job changes:
You change your job or your income goes up or down.
New children: You’ve had a child, or you’ve adopted or started fostering a child.
Childcare costs: You start paying for childcare or your childcare costs go up.
Address change: You move house, bank account or have a new phone number.
How to Apply
You cannot download a claim form or make your claim online. You can only get a tax credit claim pack from the Tax Credit helpline on 0345 300 3900
Get the following together before your call:
your N.I number
your income for the last tax year if you were employed - you can get this from your P60 or your final payslip for the tax year
details of your income for the last tax year if you were self-employed
details of any benefits you get like contribution-based Jobseeker's Allowance or Carer's Allowance
details of other income you get like savings interest, pensions or rent
details of any childcare payments you make if you use a registered or approved provider
You can fill the form in yourself and send it back by post to:
HM Revenue & Customs Tax Credits
Comben House
Farriers Way
Netherton
L75 1BY
Renewal
Every tax year (usually in April or May) those who receive either Working Tax Credit, Child Tax Credit or both will be sent a renewal pack.  You’ll need to complete and return this by 31st July. It’s vital that you do this to avoid overpayment (which you will have to pay back) or underpayment. If you’ve received the TC1015 letter informing you that your payments will stop, it’s still worth sending back the review form; if your income has fallen or will fall next year, you may still be eligible.