Children's Handbook Scotland | 2024/25Chapter 1: Benefits and tax credits 23. Tax credits
Back to previous
Chapter illustrations ()
Loading image navigation...
No image index could be found for this publication.
Close this Panel
23. 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 have a single claim for tax credits. If you have a partner, you have a couple claim.
HMRC is responsible for the administration of tax credits.
Tax credits are being replaced by universal credit (UC) and you cannot make a new claim for tax credits.
Child tax credit
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.
Who can get child tax credit
If you are not in the UC system, you qualify for CTC if:1ss3(3) and (7), 8 and 42 TCA 2002; regs 3-5 CTC Regs; reg 3 TC(R) Regs; reg 3 TC(Imm) Regs
    •you are aged 16 or over; and
    •you are responsible for a child or ‘qualifying young person’ (see here); 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 Handbook; and
    •your income is not too high (see here).
 
Who counts as a child
A child counts for CTC purposes up to their 16th birthday.2Reg 2 CTC Regs
 
Who counts as a qualifying young person
A ‘qualifying young person’ is someone who:3Regs 2, 4 and 5(2)-(4) CTC Regs
    •is aged 16, until 31 August after their 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 they have registered for work, education or training with Skills Development Scotland; and
      ◦is within 20 weeks of the date they left education or training; or
    •is aged over 16 but under 20 and on a full-time course of non-advanced education (see here) or on an approved training course (see here). A 19 year old is only included if they started, enrolled or were accepted onto the course or training before their 19th birthday.
 
Responsible for a child
You are treated as responsible for a child if:4Reg 3(1) rr1 and 2 CTC Regs
    •they normally live with you; or
    •you have the ‘main responsibility’ for them (this second test only applies if 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.5Reg 3(1) r2.2 CTC Regs You should get tax credits if the child ’normally lives with you’.6Reg 3(1) rr1 and 2 CTC Regs HMRC says this means that the child ’regularly, usually, typically’ lives with you.7para 02202 TCTM
If a child normally lives in more than one household (eg, they share their 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.8Reg 3(1) r3.1 CTC Regs HMRC is likely to take account of:9para 02204 TCTM
    •whether there is a court order setting out where the child is to live, or who is to care for them. However, the terms of a court order should not outweigh the facts of the case;10GJ v HMRC (TC) [2013] UKUT 561 (AAC)
    •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 they are ill and takes them 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/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 the child is living with them. See the relevant chapter of this Handbook for how you might be affected.
 
1     ss3(3) and (7), 8 and 42 TCA 2002; regs 3-5 CTC Regs; reg 3 TC(R) Regs; reg 3 TC(Imm) Regs »
2     Reg 2 CTC Regs »
3     Regs 2, 4 and 5(2)-(4) CTC Regs »
4     Reg 3(1) rr1 and 2 CTC Regs »
5     Reg 3(1) r2.2 CTC Regs »
6     Reg 3(1) rr1 and 2 CTC Regs »
7     para 02202 TCTM »
8     Reg 3(1) r3.1 CTC Regs »
9     para 02204 TCTM »
10     GJ v HMRC (TC) [2013] UKUT 561 (AAC) »
Amount of child tax credit
The maximum CTC you can get is made up of:
    •child element of £3,455 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 £4,170 a year for each child who gets child disability payment (CDP), adult disability payment (ADP) or personal independence payment (PIP), or is certified as severely sight impaired or blind or was in the last 28 weeks; plus
    •severely disabled child element of £1,680 a year for each child who gets the highest rate care component of CDP or the enhanced rate of the daily living component of ADP or PIP.
These are the amounts for the tax year April 2024 to April 2025. 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 they are covered by the exceptions. The exceptions include some adoption and kinship care situations – see the relevant chapter of this Handbook for more information.
Example
Holly has two children, Lily (aged two) and Olivia (aged nine). Olivia has asthma and gets the lowest rate care component of CDP. Holly’s maximum CTC for the tax year April 2024 to April 2025 is:
CTC Element
Amount
Two child elements
£3,455
£3,455
Family element
£545
Disabled child element
£4,170
Total maximum CTC
£11,625
Whether she gets maximum CTC or a reduced amount depends on her income.
 
The income threshold is £19,995 unless you are working and eligible for WTC (see here), in which case it is £7,955. 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.1ss7(2) and 13 TCA 2002; reg 4 TC(ITDR) Regs
For details of how income is treated and how your CTC award is calculated, see CPAG’s Welfare Benefits 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.
 
1     ss7(2) and 13 TCA 2002; reg 4 TC(ITDR) Regs »
Working tax credit
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.
Who can get working tax credit
If you are not in the UC system, you qualify for WTC if:1ss3(3) and (7), 10 and 42 TCA 2002; regs 4-8 WTC(EMR) Regs; reg 3 TC(R) Regs; reg 3 TC(Imm) Regs
    •you are aged at least 16; and
    •you (or your partner) are in 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 Handbook.
 
Paid work
You count as being in paid work if:2Reg 4 WTC(EMR) Regs
    •you are a single claimant, have a dependent child (see here) 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 inpatient, 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 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 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 paid 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.
 
1     ss3(3) and (7), 10 and 42 TCA 2002; regs 4-8 WTC(EMR) Regs; reg 3 TC(R) Regs; reg 3 TC(Imm) Regs »
2     Reg 4 WTC(EMR) Regs »
Amount of working tax credit
The WTC you can get is made up of a basic element of £2,435 a year, plus whichever of the following elements apply:
    •lone parent or couple element of £2,500 a year;
    •30-hour element of £1,015 a year if you work at least 30 hours a week. If you have a child, you can add your hours to those of your partner to make up the 30 hours, providing one of you works at least 16 hours a week;
    •disabled worker element of £3,935 a year if you qualify for WTC as a disabled worker;
    •severe disability element of £1,705 a year if you or your partner get the highest rate of the DLA care component or the enhanced rate of ADP or PIP daily living component;
    •childcare element of up to 70 per cent of childcare costs, up to a limit of £175 for one child or £300 a week for two or more children for whom you get CTC – ie, a maximum of £122.50 or £210. Childcare must be of a certain type, including a registered childminder, nursery or playscheme, an out-of-hours club or sitter service. You do not get help with childcare at home provided by a relative. Generally, to get the childcare element, you, and your partner if you have one, must be working 16 hours or more a week. If you claim as a couple, you can still be entitled if one of you is working 16 hours or more a week and the other is incapacitated, entitled to CA, in hospital or in prison.
These are the amounts for the tax year April 2024 to April 2025. You get less than the maximum if your income is more than a set threshold.
The income threshold is £7,955. If your income is below this, you get maximum WTC. If your income is above this threshold, you get a reduced amount.
For details of how income is treated and how your WTC award is calculated, see CPAG’s Welfare Benefits 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.
Changes of circumstances and tax credits
If your circumstances change, tell HMRC immediately to avoid being overpaid or underpaid. For example, you should inform it if:
    •you stop, or start, being part of a couple;
    •you stop being responsible for a child – eg, a child stops living with you;
    •you start being responsible for a child – eg, a child comes to live with you or you have a baby;
    •a child for whom you claim stops counting as a child or qualifying young person – eg, they leave education;
    •your hours of work fall below 16, 24 or 30;
    •your hours of work increase;
    •your childcare costs change by more than £10 a week for four weeks in a row;
    •you, your partner or a dependent child are awarded DLA, CDP, ADP or PIP, or an award of one of these benefits stops or changes;
    •you stop being entitled to IS, income-based JSA, income-related ESA or PC;
    •you have an unexpected change in your income.