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Children's Tax Credit |
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You will no doubt have read in the press that, as from April 2001, people who have at least one child aged under 16 living with them may be eligible to receive the Children's Tax Credit. However, your actual entitlement to this credit may not be as straightforward. |
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It is reported that the Children's Tax Credit could be worth up to £520 in terms of a reduction in tax liability, and that this credit is available to both married and unmarried couples, as well as single parents. The introduction of this credit is to replace the married couple's allowance and associated allowances which were withdrawn in April this year. |
| Richard Tyler, Ely office Partner, warned "the rules relating to Children's Tax Credit are more complex than the relatively clear-cut rules which applied to the earlier allowances. In certain circumstances, entitlement to Children's Tax Credit may reduce the amount of Working Families' Tax Credit, thus limiting the actual monetary benefit". |
| Richard also indicated "unlike the earlier allowances, Children's Tax Credit will be reduced where the person claiming it pays tax at the higher rate, resulting in a £1 reduction for each £15 of income taxed at the higher rate. In the first year of the new system this means that individuals whose income exceeds approximately £41,000 are unlikely to get Children's Tax Credit at all". |
| In the case where only one of a couple pays tax at the higher rate, it is they who must actually make the claim for children's Tax Credit. If neither partner pays tax at the higher rate then the credit may be claimed by either, with any surplus credit transferred to the other partner, or split between the pair in the first instance. |
| If you have claimed married couple's allowance, additional personal allowance, widow's bereavement allowance or relief for maintenance payments in the past, then you should already have received a claim form (CTC1) automatically. If not, or if your circumstances have changed, then you should request the form from your Tax Office or seek further advice from a professional tax advisor. |
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