Children's handbook Scotland
Chapter 1: Benefits and tax credits
18. Tax credits
Tax credits comprise child tax credit (CTC) and working tax credit (WTC). You can be entitled to either CTC or WTC, or both.
CTC can be paid whether you are in or out of work if you have a dependent child. Your entitlement and how much you get depends on how much income you have. WTC can be paid if you are working for at least 16 hours (or in some cases 24 or 30 hours) a week and have a low income.
If you are single, you make a single claim for tax credits. If you have a partner, you make a couple claim.
HM Revenue and Customs (HMRC) is responsible for the administration of tax credits.
Tax credits are being replaced by universal credit (UC) and eventually claimants who are on tax credits will be transferred to UC.
CTC is a payment made to people who have children. It can be paid whether you are working or not working. You get a higher amount if you have a child with a disability. The amount of CTC depends on your income in the tax year.
If you are not in the UC system, you qualify for CTC if: you are aged 16 or over; and you are responsible for a child or 'qualifying young person' (see below); and you are 'present and ordinarily resident' in the UK, not a 'person subject to immigration control' and have a 'right to reside'. These terms are explained in CPAG’s Welfare Benefits and Tax Credits Handbook; and your income is not too high (see ).
A child counts as a child for CTC purposes up to her/his 16th birthday.
A 'qualifying young person' is someone who: is aged 16, until 31 August after her/his 16th birthday; or is aged 16 or 17; and has left education or training; and has, within three months of leaving education or training, notified HMRC that s/he has registered for work, education or training with Skills Development Scotland; and is within 20 weeks of the date s/he left education or training; or is aged over 16 but under 20 and on a full-time course of non-advanced education (see ) or on an approved training course (see ). A 19-year-old is only included if s/he started, enrolled or was accepted onto the course or training before her/his 19th birthday.
You are treated as responsible for a child if: s/he normally lives with you; or you have the main responsibility for her/him (this second test only applies where you and someone else make competing claims for CTC for the same child).
Only one person (or one couple in a joint claim) can get tax credits for a particular child. You should get tax credits if the child ’normally lives with you’. HMRC says this means that the child ’regularly, usually, typically’ lives with you.
If a child normally lives in more than one household (eg, s/he shares her/his time between two different households), there may be more than one potential claimant for tax credits. You can decide between you who should make the claim. If you cannot agree, HMRC decides whose claim should take priority by establishing who has 'main responsibility' for the child. HMRC is likely to take account of: whether there is a court order setting out where the child is to live, or who is to care for her/him. However, the terms of a court order should not outweigh the facts of the case; how many days a week the child lives in the different households; who pays for the child’s food and clothes; where the child’s belongings are kept; who is the main contact for nursery, school or childcare provider; who does the child’s laundry; who looks after the child when s/he is ill and takes her/him to the doctor.
If you disagree with HMRC's decision (eg, it decides that you cannot get CTC because another person has the main responsibility for a child), you can ask for a review and then appeal against it (see Chapter 2).
There are special rules about when CTC can be paid if a child is absent from home. Whether CTC continues to be paid depends on the circumstances. See the relevant chapter of this Handbook for information on what happens to CTC when a child is away from home. There are also special rules which mean that some people cannot get CTC for a child even though s/he is living with them. See the relevant chapter of this Handbook for how you might be affected.
The maximum CTC you can get is made up of:child element of £2,780 a year for each child. This may be subject to a 'two-child limit' (see below); plus family element of £545 a year. One family element is payable if you are responsible for a child born before 6 April 2017. If you are not responsible for a child born before 6 April 2017 your CTC does not include the family element; plus disabled child element of £3,275 a year for each child who gets disability living allowance (DLA), personal independence payment (PIP) or is certified as severely sight impaired or blind or was in the last 28 weeks; plus severe disability element of £1,325 a year for each child who gets the highest rate care component of DLA or the enhanced rate of the daily living component of PIP.
These are the amounts for the tax year April 2018 to April 2019. You will get less than the maximum if your income is more than a set threshold.
A 'two-child limit' was introduced on 6 April 2017. In general, this means that a child element is not payable for a child born on or after 6 April 2017 if you already have two or more children included in your CTC award, unless s/he is covered by the exceptions. You can continue to get three or more child elements already included in your claim before this date.The exceptions include some adoption and kinship care situations – see the relevant chapter of this Handbook for more information.
Meg has two children, Bella (aged two) and Meena (aged four). Meena has asthma and gets the lowest rate care component of DLA. Meg's maximum CTC for the tax year April 2018 to April 2019 is:
Two child elements
|Total maximum CTC||9,380|
The income threshold is £16,105 unless you are working and eligible for WTC (see ), in which case it is £6,420. If your income is below this, you get maximum CTC. If your income is above this threshold, you get a reduced amount.
If you are entitled to CTC and are also getting income support (IS), income-based jobseeker's allowance (JSA), income-related employment and support allowance (ESA) or pension credit (PC), you get maximum CTC.
For details of how income is treated and how your CTC award is calculated, see CPAG’s Welfare Benefits and Tax Credits Handbook.
See the relevant chapters of this Handbook for more information on how specific income (eg, fostering allowances and payments from the local authority) is treated.
WTC helps supplement low wages. It can only be paid to those who are working (employed or self-employed) for at least 16 hours a week or, in some cases, 24 or 30 hours a week. You get a higher amount if you work 30 hours or more or have a disability. If you get CTC, you can also get childcare costs paid with WTC. The amount of WTC you get depends on your income in the tax year.
If you are not in the UC system, you qualify for WTC if: you are aged at least 16; and you (or your partner) are in full-time paid work (see below); and your income is low enough; and you are present and ordinarily resident in the UK and you are not a 'person subject to immigration control'. These terms are explained in CPAG’s Welfare Benefits and Tax Credits Handbook.
You count as being in full-time paid work if: you are a single claimant, have a dependent child (see ) and you work for at least 16 hours a week; or you are a couple, have a dependent child and your combined working hours are at least 24 a week. If you both work, one must do at least 16 hours. If only one of you works, you must do at least 24 hours. Note: if the non-working partner is incapacitated, a hospital in-patient, in prison or entitled to carer's allowance (CA), you can qualify if you work at least 16 hours a week. See CPAG's Welfare Benefits and Tax Credits Handbook for more details; or you have a disability that puts you at a disadvantage in getting a job and you work for at least 16 hours a week. For more details, see CPAG’s Welfare Benefits and Tax Credits Handbook; or you are aged at least 60 and you work at least 16 hours a week; or you are aged at least 25 and you work at least 30 hours a week.
Sometimes you count as being in full-time work even when you are not – eg, while you are getting statutory adoption pay or maternity pay, or, in certain cases, for up to 28 weeks of sickness.
Work can be as an employed or self-employed earner. Fostering and, in certain cases, kinship care can count as self-employed work. See Chapters 7 and 8 for more details.
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