3. Amount of child tax credit

• Step 1: work out your maximum child tax credit
• Step 2: getting a means-tested benefit
• Step 3: not getting a means-tested benefit
• Step 4: work out your income
• Step 5: calculate your 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 as well as CTC (see Chapter 12), your award for both tax credits 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, 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 subscribers) for the detailed rules.

Step 1: work out your maximum child tax credit

The maximum CTC you can get is made up of:

•child element of £3,455 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 subscribers) 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 £4,170 a year for each child who gets child disability payment (CDP), disability living allowance (DLA), adult disability payment (ADP), personal independence payment (PIP), or is certified as severely sight impaired or blind; plus
•severely disabled child element of £1,680 a year for each child who gets the highest rate care component of CDP/DLA/ADP or the enhanced rate daily living component of ADP/PIP.

These are the maximum amounts for the tax year April 2024 to April 2025. 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 2024 to April 2025 is:

Elements	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.

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 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 CDP/DLA or ADP/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 (for subscribers).

Step 2: 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 3: 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 £19,995, 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 £7,955 instead of £19,995 (and Step 1 includes WTC elements).

Step 4: work out your income

How your student income is calculated for tax credits is covered in Chapter 17. 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 5: 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 1 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 subscribers) for more details.