There are two tax credits you may be eligible for this year: children’s tax credit and working families tax credit. |
| Children’s tax credit This cuts your tax bill by up to £529 this year (2002-03) and can be claimed by families with at least one working parent and one child under 16 living with them. There is only one credit per family, regardless of how many children you have. It is worth applying for children’s tax credit where the highest paid parent earns no more than £42,000, as the credit starts to be withdrawn once the income of the person claiming the credit goes over the higher rate tax threshold. The rate of withdrawal is £1 of credit for each £15 of income taxed at the higher rate. In two-parent families, either parent can claim the credit where both of them are basic rate taxpayers. But if one or both parents pay higher rate tax, the credit must be claimed by the highest earner. You get the credit via your tax code if you are an employee, or claim it on your self-assessment form if you are self-employed. You can’t claim the credit if you don’t have any taxable income to set it against. If you have a baby this tax year (April 6 2002 to April 5 2003) you can claim a baby rate of children’s tax credit. This is double the normal credit and cuts up to £1,049 off your tax bill. |
| Call 0845 300 1036 for a tax credit claim form, or download one. |
| Working families tax credit |
| This tax credit is aimed at low-income couples or lone parents who work at least 16 hours a week, have one or more dependent children, and have savings of less than £8,000. |
| You can claim the basic credit of £60 a week where family earnings are less than £92.90 a week after tax and national insurance, and joint savings are under £8,000. |
| You get an extra £11.65 if you or your partner works more than 30 hours a week. |
| You also get £26.45 a week for each child aged 15 or under and £27.20 for 16-18 year olds in full-time education. |
| Families with take-home pay of more than £92.90 a week lose their WFTC at a rate of 55p for each extra £1 they earn. |
| The credit is paid through the payroll if you are employed. If you are self-employed, or where the credit goes to the non-working partner, it is paid directly. |
| Where both parents in two parent families or lone parents work 16 hours a week they can get help with childcare costs via the childcare tax credit. |
| This covers up to 70 per cent of childcare costs up to a maximum of £135 a week for one child and £200 for two or more children. It is only available for care provided outside the home via a registered childminder, nursery or similar. WFTC awards normally last for 26 weeks, but awards with a start date on or after June 4 2002 will run until April 7 2003. |
| For information on how to apply, click here to visit the Inland Revenue website |
| New tax credits Children’s tax credit and working families tax credit will be replaced from April 2003 by the child tax credit and the working tax credit. These new credits extend help to families that are not in work, and to low paid individuals without children. |
| Child tax credit Families with joint incomes of up to £58,000 will be eligible to claim the new credit, rising to £66,000 in the year following the birth of a child. The credit will be paid to the main carer, generally the mother, rather than reducing the tax bill of the claimant. The basic family element, which most eligible families will get in full, is £10.45 a week, or £545 a year. This will be doubled for the year following a child’s birth. The family element is withdrawn at a rate of £1 for each £15 of joint income over £50,000, reducing to nil above £58,000. There will also be a child element for each child of £27.75 a week (£1,445 a year), but this will be only paid in full on joint incomes below £13,230. Above that, the child element will taper away until you are left with just the family element. The income thresholds at which this happens are: |
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| There is an additional credit for a disabled child of £41.30 a week (£2,155 a year). The credit will be paid for a year at a time, based on your income in the previous tax year. You can apply to be reassessed on your current year income if your income changes, although increases of less than £2,500 will be ignored. Overpayments will be collected via an adjustment of child tax credit for the following year, or of your tax code, or as a last resort by asking for a direct payment. The child tax credit will be paid on top of child benefit, which will remain a universal benefit. |
| Working tax credit The working tax credit extends the principle of the working families tax credit to people aged 25 or over without children. |
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| It will be paid through the wage packet to people working 30 hours a week, with a lower level of 16 hours for lone parents and the disabled. Couples with children will be able to meet the 30 hours threshold by adding their hours together. |
