MONEY COMMENT
The New Child Tax Credit

By Jane Mack (TMFJane)
April 8, 2003

The advent of the new tax year may have brought with it an increase in National Insurance Contributions but parents can claw back some of this by ensuring they claim the new Child Tax Credit.

It replaces the Children's Tax Credit and is designed to streamline all the various 'child' elements available in other forms of benefits such as Income Support and the Jobseeker's Allowance.

Payment is based on overall household income which removes an unfortunate anomaly under the old system whereby a single earner on a high income was not entitled even though a dual-earning family on the same income was.

Families earning up to £58,000 a year can claim the credit and even those on up £66,000 will get help in the first year of a child's birth via the double 'baby rate' of tax credits (worth up to £1,049).

Households earning less than £13,000 can expect a minimum of £54.25 a week (including Child Benefit) if you have one child with a further £38.50 for any second or subsequent child. Those earning up to £50,000 a year can expect at least £26.50 (including Child Benefit). After that it works on a taper system. Overall, about 90% of families are expected to benefit.

Another key change is that any Child Tax Credit will be paid direct to the primary carer, usually the mother, in the same way as Child Benefit. So, in the case of a mother who stays at home with the children and a father who goes out to work, the Child Tax Credit will be removed from his salary and paid directly into the mother's bank account.

You can find out how to claim on the Inland Revenue Tax Credits web site. It's a long form but it's well worth taking some time to fill it out. It's reckoned that around 2m families entitled to make a claim have not done so. Make sure your family isn't one of them!