Child Tax Credit and Working Tax Credit

Tax credits will usually be the second thing you claim when there is a new child in your family. If you are already claiming tax credits, you need to let the Tax Credit Office know about the addition to your family. Tax credits are administered by the Tax Credit Office, which is part of Her Majesty's Revenue and Customs (what used to be called the Inland Revenue). Child Tax Credit is for people who are responsible for children.

Working Tax Credit is for people who work. Both payments are means-tested; they depend on your income, and you claim them together. Most families are able to get some Child Tax Credit. However, like child benefit, if you have come here from another country, you may not be able to claim tax credits at all. You should get specialist advice.

Although tax credits are not directly connected to how much tax you pay, they are based on annual income over the tax year. Income means your income and your partner?s income. When you first claim, your award will be worked out using your income for the previous tax year.

Children and the tax credit calculation

When you have or adopt your first child, you may become entitled to Child Tax Credit because you are responsible for a child for the first time. You may also become entitled to Working Tax Credit for the first time. This is because people without children usually have to be at least 25 and working at least 30 hours a week to be eligible for Working Tax Credit (exceptions to the 30 hour rule are disabled people and some people over 50 who have been on benefits), and even then you are unlikely to get any help unless your income is very low.

But once you have a child, you or/and your partner only have to work 16 hours or more a week, and as long as you are at least 16, you are eligible for Working Tax Credit. However, whether you get any help, and how much, still depends on your income.

Working tax credit and child tax credit are worked out together. You get different tax credit elements for different circumstances. These are added up to give your maximum tax credits, and the maximum is then reduced depending on your income. Once you have a child, you are more likely to get some help, because extra elements will be included in your claim.

If you have a child under one in your family, you get an extra element equivalent to £10.50 a week (sometimes called the baby element or baby addition). You will lose this when your child has their first birthday (unless another child under one has joined your family), so you should expect your tax credits to go down at this point. You only get one baby element, even if you have twins under one. There is more information about how tax credits are worked out in our factsheet 'Tax Credits and Benefits'.

You don't have to wait until you go back to work to claim Working Tax Credit. This is because you will be treated as working whilst you are on Ordinary Maternity Leave, Ordinary Adoption Leave, Paternity Leave, or during any period when you get Statutory Maternity Pay, Maternity Allowance, Statutory Paternity Pay or Statutory Adoption Pay. You will be treated as working the same number of hours a week as you were immediately before your leave or the period of payment began.

This also means that you can claim the childcare element of Working Tax Credit to help with the costs of registered or approved childcare if you are single, or if your partner also works 16 hours or more a week or is getting disability benefits. Again, whether or not you will get this help depends on your income.

All your Maternity Allowance and £100 a week of any Statutory Maternity Pay, Statutory Paternity Pay or Statutory Adoption Pay is ignored as income for tax credits. This means you may either get an underpayment at the end of the tax year (because your income is less than expected), or you could ask the Tax Credit Office to base your award on an estimate of the current tax year's income (see below).

You should tell the Tax Credit Office when MA/SMP/SPP/SAP stops and/or you start your Additional Maternity/Adoption Leave. There is more information about maternity leave and types of payment in our factsheet Maternity Rights, and more information about adoption leave in our factsheet Adoption.

How to claim

You claim Working Tax Credit and Child Tax Credit on the same form. You can call the tax credit helpline to ask for a claim form (see the end of this leaflet), or you can get a form from your local HMRC enquiry office, or Jobcentre Plus office. It is not possible to claim online at the moment but the government has stated that it does want to allow people to do this again soon; you should check the HMRC website for further details.

If you are already claiming, let the Tax Credit Office know that there is a new child in your family. You can do this over the phone, or in writing. If you telephone, it is a good idea to make a note of the date and time you call, and if you send a letter, make sure you keep a copy.

When to claim

Like Child Benefit, you should try to claim tax credits within three months of having a new child in your family, or if you are already claiming, let the Tax Credit Office know within three months. This is because tax credits can only be backdated (paid for a period before you claim) for three months, so you will lose money if you tell them any later.

Revising your award to reflect your current income

If you know that your income for the current tax year is going to be significantly lower than your income for the previous tax year, you might want to ask the Tax Credit Office if they can revise your award so it is based on an estimate of the current tax year's income. This means that you get more money at a time when you are likely to need it, and may also mean that you are entitled to other help like the Sure Start Maternity Grant (see below) more quickly.

Remember that annual income means your income and the income of a partner who lives with you. If you are on maternity or adoption benefits, and especially if you are going to have a period of unpaid leave, your current tax year's income is likely to be a lot lower. The problem is that you may find it difficult to estimate your current tax year's income, because, for example, you do not know when or if you are going to go back to work, and if so, how many hours a week you will be doing.

You should bear in mind that if you give the Tax Credit Office an estimate which turns out to be too low, and they use this to calculate your tax credits, you will probably be overpaid and will have to pay them back. There is more information about overpayments in our leaflet 'Tax credits and benefits'.

If you decide not to have your award revised, so it continues to be based on the previous tax year's income, then you are likely to be owed an underpayment at the end of the tax year.

For more information, or to claim, call the Tax Credit Office on 0845 300 3900

For information call Working Families helpline on 0800 013 0313 or see www.workingfamilies.org.uk