Chapter 19: Child tax credit

CPAG

This chapter covers:

1. What is child tax credit (here)

2. Who is eligible (here)

3. Amount of child tax credit (here)

4. Awards of child tax credit (here)

5. Challenging a decision (here)

6. Tax credits and benefits (here)

Basic facts

– Child tax credit is paid to families with children.

– Both part-time and full-time students with children are eligible.

– The amount you get depends on your income, but most student support is ignored in the assessment.

1. What is child tax credit

Child tax credit (CTC) is a payment made to people with children. It is administered by HM Revenue and Customs and paid whether you are working or not working. Full-time and part-time students with children are eligible. 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.

Note: you cannot make a new claim for CTC, as it is in the process of being replaced by universal credit. If you already get CTC, you can add working tax credit to your award and vice versa.

2. Who is eligible

As new claims cannot be made, students getting child tax credit (CTC) will be those who were already on CTC (and/or working tax credit – WTC) before starting the course. If you cannot claim CTC, you may be able to get universal credit instead (see Chapter 18).

You are eligible for CTC if you meet all the following conditions.1Regs 3-5 CTC Regs

•You are aged 16 or over.

•You have a dependent child. You can get CTC for a child until 1 September after her/his 16th birthday. If s/he stays on at school, in other full-time non-advanced education or is on approved training, you can get CTC for her/him until her/his 19th, or sometimes 20th, birthday.2Reg 5 CTC Regs This includes during gaps between one course ending and another starting, provided the young person starts the next course. You can only continue to get CTC for a 19 yearold on a course or training which s/he was accepted on, enrolled on or started before s/he reached 19 until s/he leaves the course or turns 20, whichever is earlier. You may be able to continue to get CTC for a young person under age 18 for 20 weeks after s/he leaves non-advanced education if s/he notifies HM Revenue and Customs (HMRC) within three months that s/he has registered for work or training with a qualifying body – eg, the place where your local authority provides careers advice for young people or the Ministry of Justice. If your child lives with someone else part of the time, you should decide between you who has main responsibility; otherwise HMRC decides who gets CTC.

•You are ‘present and ordinarily resident’ in Britain, are not a ‘person subject to immigration control’ and have a ‘right to reside’. You must normally have been living in the UK for three months before you claim. These terms are explained in CPAG’s Welfare Benefits and Tax Credits Handbook. Overseas students can get further advice from UKCISA (see Appendix 2).

•Your income is not too high (see Chapter 23).

There are no special rules for students. Both part-time and full-time students are eligible.

1 Regs 3-5 CTC Regs »

2 Reg 5 CTC Regs »

Your parent gets child tax credit for you

If you live with your parent(s), s/he cannot get CTC for you if you are in higher education. S/he can continue to get CTC for you until your 19th, or sometimes 20th, birthday if you are in full-time non-advanced education (see here). The course must be one recognised by the government and be more than 12 hours a week, on average, in term time. The course hours include tuition, supervised study, exams, practical work and any exercise or project in the curriculum. Do not count meal breaks or unsupervised study. You count as full time between courses if you are enrolled on another non-advanced course.

Your parent(s) cannot get CTC for you if you get universal credit, income support, income-based jobseeker’s allowance, employment and support allowance, CTC or WTC in your own right.

If you live with a partner, or are married or in a civil partnership, your parent(s) can only get CTC for you if your partner is also a young person in full-time non-advanced education or approved training.

In some circumstances, special rules apply – eg, if you are being looked after by a local authority or are in prison or a young offenders’ institution.

3. Amount of child tax credit

The amount of child tax credit (CTC) you get if you are not working and eligible for working tax credit (WTC) depends on your family circumstances (your ‘maximum CTC’) and how much income you have. If you are eligible for WTC (see Chapter 20), you claim both tax credits together and the amount is worked out together. Tax credits are calculated according to a maximum annual amount that you could receive in the tax year (6 April - 5 April). However, often an annual award is worked out by adding together amounts calculated over separate periods within the year because, for example, you start a new claim or your circumstances change – eg, you have another child, you cease to be a member of a couple or you start work or increase your hours. What follows, therefore, is a simplification of what is often a very complicated calculation and assumes you are claiming CTC (but not WTC) for a full tax year and have no changes in your circumstances during that year. See CPAG’s Welfare Benefits and Tax Credits Handbook for the detailed rules.

HM Revenue and Customs (HMRC) has a tax credits calculator at , much CTC you are likely to get.

Step one: work out your maximum child tax credit

The maximum CTC you can get is made up of:

•child element of £2,845 a year for each child. Note: you cannot get a child element for a child born on or after 6 April 2017 if you are already claiming for two or more children. There are exceptions (see CPAG’s Welfare Benefits and Tax Credits Handbook for these); plus

•family element of £545 a year. You only get this if your claim includes a child born before 6 April 2017; plus

•disabled child element of £3,435 a year for each child who gets disability living allowance (DLA), personal independence payment (PIP) or is certified as severely sight impaired or blind; plus

•severely disabled child element of £1,390 a year for each child who gets the highest rate care component of DLA or the enhanced rate daily living component of PIP.

These are the maximum amounts for the tax year April 2021 to April 2022. You get less than the maximum if your income is above a set threshold.

Example

Mairi has two children: Daisy, aged six, and Meena, aged nine. Meena has asthma and gets the lowest rate care component of DLA. Mairi’s maximum CTC for the tax year April 2021 to April 2022 is:

Two child elements	£ 2,845
	2,845
Family element	545
Disabled child element	3,435
Total maximum CTC	9,670

Whether she gets maximum CTC or a reduced amount depends on her income.

If your circumstances change so that you should gain or lose an element, tell HMRC so your award can be adjusted. If you should gain an element (eg, you have a new baby), you must tell HMRC within one month, otherwise you do not get the increase fully backdated. The exception to this is that the disabled child element and the severely disabled child elements can be fully backdated if you notify HMRC within one month of the DLA or PIP being awarded.

Other changes must be notified within one month – eg, if you stop being part of a couple. For details, see CPAG’s Welfare Benefits and Tax Credits Handbook.

Step two: getting a means-tested benefit

You automatically get maximum CTC if you are getting income support (IS), income-based jobseeker’s allowance (JSA), income-related employment and support allowance (ESA) or pension credit (PC).

Step three: not getting a means-tested benefit

If you do not get IS, income-based JSA, income-related ESA or PC, you must compare your income with a set threshold. The income threshold is £16,480, unless you are working and eligible for WTC. If your income is the same as or below this, you get maximum CTC. If your income is above this threshold, you get a reduced amount. If you or your partner are working and you are eligible for WTC, the income threshold is £6,565 instead of £16,480 (and Step one includes WTC elements).

Step four: work out your income

How your student income is calculated for tax credits is covered in Chapter 23. A CTC award for a tax year is usually based on your income in the previous tax year. However, if you expect your income over the current tax year to be more than £2,500 lower or higher than the previous year, tell HMRC and it reassesses your tax credits. Your award is then based on the current year’s income plus £2,500 if it is more than £2,500 lower than in the previous year, or based on the current year’s income minus £2,500 if it is more than £2,500 higher than the previous year’s award.

Step five: calculate your child tax credit

If your income is less than or the same as the threshold, you get maximum CTC. If your income is higher than the threshold, work out 41 per cent of the difference. Your CTC is the amount worked out at Step one minus 41 per cent of the difference between your income and the threshold.

Note: this simplified calculation gives an approximate amount of CTC. Amounts are actually calculated using daily rates. See CPAG’s Welfare Benefits and Tax Credits Handbook for more details.

4. Awards of child tax credit

Tax credit awards are based on your income as it was in the previous tax year. Bear in mind that HM Revenue and Customs (HMRC) requires your income for a tax year, April to April, even though your student award may run from September.

Contacting HM Revenue and Customs

You can report changes of circumstances or make enquiries to the Tax Credit Helpline on 0345 300 3900 (textphone 0345 300 3909) between 8am and 4pm, Monday to Friday. You can also report a change online at .

Your award runs until the end of the tax year, at which point you are sent a renewal form. Your award can change or end during the year. Tell HMRC about changes in your circumstances. You should also tell HMRC if you expect your income that counts for tax credits to decrease by more than £2,500 in the current tax year, or if you expect it to increase by more than £2,500.

Tax credits are paid directly into a bank account.

5. Challenging a decision

If you think a decision about your child tax credit is wrong, you can ask HM Revenue and Customs (HMRC) to look at it again. This process is known as a ‘mandatory reconsideration’. Provided you ask within the time limit (usually 30 days), HMRC notifies you of the decision in a ‘mandatory reconsideration notice’. If you are still not happy when you get this notice, you can appeal to the independent First-tier Tribunal. If it was not possible to ask HMRC to reconsider the decision within 30 days, you can ask for a late review (within 13 months), explaining why it is late. You can also ask HMRC to look at a decision again at any time if certain grounds are met – eg, if there has been an official error.

If you want to complain about the way your claim has been dealt with, write to the Tax Credit Office, BX9 1ER.

If you have been overpaid tax credits, the leaflet COP26, What Happens if We’ve Paid You Too Much Tax Credits, explains when the overpayment can be written off and what you need to do. HMRC sets out what you are expected to do to ensure your claim is correct and what you can expect of HMRC. If you have met all your responsibilities and HMRC has failed to meet one of its, the overpayment should not be recovered. This leaflet also explains when you can ask to repay an amount owed over a longer period. If an overpayment is challenged, it should not be recovered until the dispute is resolved. If you want to dispute recovery of an overpayment, HMRC expects you to do so within three months.

6. Tax credits and benefits

Means-tested benefits

Child tax credit (CTC) is not taken into account as income for income support, income-based jobseeker’s allowance or income-related employment and support allowance, although working tax credit (WTC) is.

Tax credits are taken into account as income for housing benefit. If a tax credit overpayment from a previous year is being deducted, the amount of the tax credit award less the deduction is taken into account. If you have been overpaid in the same year as the award and the tax credit award is consequently reduced, the lower amount of the award still to be paid to you is taken into account.

Arrears of tax credits are treated as capital for means-tested benefits and disregarded for 52 weeks.

CTC is taken into account when calculating whether the benefit cap applies (see here). If you or your partner get WTC, the benefit cap does not apply.

Child benefit

Child benefit is paid in addition to tax credits. It is ignored as income in the tax credit assessment.

Passported benefits

Getting CTC or WTC may entitle you to other benefits. You may be able to get the following.

•Free school lunches from the local authority. Your income for tax credit purposes must be no more than £16,480 a year. You must get CTC but not be eligible for WTC, unless your income for tax credit purposes is no more than £7,500, or you are getting the four-week run-on of WTC because you have reduced your hours or stopped work.1The Education (Free School Lunches) (Prescribed Tax Credits) (England) Order 2003, No.383; The Education (Free School Lunches) (Prescribed Tax Credits) (Wales) Order 2003, No.879

•Health benefits, such as free dental treatment, free prescriptions (in England), sight tests and vouchers for glasses. Your income for tax credit purposes must be no more than £15,276 and you must be getting CTC or WTC with a disability element. See Chapter 11 for other ways to qualify for health benefits.

•Sure Start maternity grant (if there is no other child under 16 in the household) or a funeral expenses payment. You also qualify if you get WTC with a disability or severe disability element.

•Healthy Start food vouchers. If you have a child under four, or you are pregnant, and get CTC but are not entitled to WTC (except during the four-week run-on period) and have an annual income for tax credit purposes of no more than £16,190, you may be eligible for Healthy Start food vouchers and free vitamins.2HSS&WF(A) Regs

1 The Education (Free School Lunches) (Prescribed Tax Credits) (England) Order 2003, No.383; The Education (Free School Lunches) (Prescribed Tax Credits) (Wales) Order 2003, No.879 »

2 HSS&WF(A) Regs »

Base text size -

Chapter illustrations ()