Child and working tax credits were introduced in April 2003 replacing the previous system of children's and working family's tax credits.

Working tax credit is paid directly into the claimant’s bank account, and can be claimed by working persons who fulfil the required conditions (e.g. couples working at least 16 hours per week, earning up to £12,500, who have a child/children).

The threshold up to which Child Tax Credit (CTC) can be claimed is far higher than Working Tax Credit (over six million families in the UK are entitled to some form of this credit).

Households with gross income of up to about £60,000 may be able to claim. The income figure is higher for those with a child of less than 1 year.

Claims

Child Tax Credit is paid to the person mainly responsible for looking after the child/children (normally direct into their bank account). In order to get the credit, a claim needs to be made via a claim form TC600. This may be obtained from H M Revenue & Customs or a claim may be made online via their website at www.hmrc.gov.uk  (click on 'Tax Credits'), although this facility had been temporarily withdrawn at the time of writing.

Without a claim, no credit is due. Furthermore, claims can only be backdated for a maximum of 3 months. Therefore a claim for Child Tax Credit for 2008/09 must be made by 5 July 2008 in order to ensure no entitlement is lost.

Change of Circumstances

Changes in circumstances, such as an increase in childcare costs of over £10 per week or an increase in pay or hours worked, must be notified to the Revenue within one month of the change occurring.

Entitlement

To receive CTC the applicant (whether a single person, a married couple or a man and woman living together as if married) must be responsible for either:

A child up to age 16 (or up to 1 September following their 16th birthday), or

A 'young person' up to 18 if in full-time non-higher education

You do not have to be working to claim CTC.

Renewals Process

Where a claimant has received credits at a rate other than the basic family element, they will receive a renewals pack consisting of:

• annual review

• annual declaration

The annual declaration is a statement of the income received during 2007/08 and must be returned by 31 August 2008. Late return of the form entails that:

• payment of credits will stop

• an initial penalty of £300 may apply (with the possibility of further penalties being imposed)

The income to be included is generally that as defined for tax purposes, and includes major benefits such as company cars, free private fuel and taxable mileage payments. There are however certain exclusions (e.g. the benefit of an employer provided living accommodation, the first £300 of savings interest).

A claim may be based on estimated income for the year of claim. However if you provide estimated figures you will need to provide actual figures by a deadline to be confirmed by HMRC.

2008/09 Claims

These are based on the income for 2007/08, as shown in the annual declaration above. Awards may be adjusted after 5 April 2009 in the renewals process for 2008/09.

Penalties

There will be a penalty for fraudulent or negligent claims limited to a maximum of £3000 per offence.

Amount Payable

The following tables give details of the Working and Child Tax Credit rates for 2007/08 and 2008/09:

Working and child tax credits - rates 2008/09

£ per year unless otherwise stated
 

Working Tax Credit	2007/08	Change	2008/09
Basic Element	1730	70	1800
Couple & lone parent element	1700	70	1770
30 hour element	705	30	735
Disabled worker element	2310	95	2405
Severe disability element	980	40	1020
50+ return to work payment (16-29 hrs)	1185	50	1235
50+ return to work payment (30+ hrs)	1770	70	1840

Childcare element of Working Tax Credit	2007/08	Change	2008/09
Maximum eligible cost for 1 child	175pw	-	175pw
Maximum eligible cost for 2+ children	300pw	-	300pw
Proportion of eligible costs covered	80%	-	80%

Child Tax Credit	2007/08	Change	2008/09
Family Element	545	-	545
Family element, baby addition	545	-	545
Child element	1845	240	2085
Disabled child element	2440	100	2540
Severely disabled child element	980	40	1020

Income threshold and withdrawal rates	2007/08	Change	2008/09
First income threshold	5220	1200	6420
First withdrawal rate	37%	2%	39%
Second income threshold	50000	-	50000
Second withdrawal rate	6.67%	-	6.67%
First threshold for those entitled to CTC only	14495	1080	15575
Income disregard	25000	-	25000

Please note: This guide is intended to provide basic information only. Where specific advice is required, we recommend that you seek proper professional help; either from this firm or other suitably qualified person or practice.