Childcare Element of Working Tax Credit (or Childcare Tax Credit)*

(Do not confuse with Child Tax Credit)

To qualify for childcare tax credit you must:

Be a single parent working 16+ hours a week
Be in a couple both working 16+ hours a week

If that's you, and your total household income is under £40,000, you should DEFINITELY check your entitlement

How do I apply and check my exact eligibility?

Rather strangely the government has moved away from the internet for tax credits and prefers people to call the tax credit helpline on 0845 300 3900 to see if they're eligible and find out how to apply. The helpline is open every day, including weekends, from 8am to 8pm (although you can also check on the HMRC Questionnaire: http://www.hmrc.gov.uk/taxcredits/payments-entitlement/entitlement/question-how-much.htm).

How is the cash paid?

It's paid directly into your bank or building society account each week or month. You can get help for up to 80% of eligible childcare costs, which is limited to £175 a week for those with one child and £300 for those with two or more children; meaning a maximum payout of £140 or £240.

What counts as being a single parent?

If you're married or living with someone, then you must put in a joint, rather than single, application for tax credits. You can only put in a single claim if you don’t have a partner. If you're a permanently separated couple, then you are counted as a single parent and the payment is made to the child’s main carer.

What counts as income?

It’s any money earned from paid work (or self-employed profits) plus any extra income above £300 you (or a partner) receive from a pension, savings, renting out a property, or things such as a trust or interest in the estate of a person who has died.

Yet you don’t need to include maintenance money (payment from an ex-partner to help cover the costs of raising your children) or your children’s income.

When do I need to apply by?

You can apply at any time during the year if you're a new application, though if you're renewing and have been asked to send back a form it's important you do that by 31 July.

What do I do if the childcare costs increase or decrease?

If your childcare costs go up, tell them about it immediately as you may be able to get more money and if you're late you can only backdate it for up to three months.

If the costs go down, do the same as you're then being overpaid and will have to give the money back, never easy if you've already spent it.

I use/pay more for childcare in the holidays, AM I still Eligible?

Yes. If you pay more in the summer, your assessment is based on your average year-round childcare costs and that includes summer and other holidays. So add up the total cost for the year and that's what you say. This means you need to try to budget over 12 months.

If you just pay for care in the summer, you'll only get a payment during that time (in previous years summer cash was spread over the whole year) so contact the Tax Credit office to tell them as soon as you can.

What if I lose my job or have my hours cut to under 16?

This benefit is for parents who work over 16 hours a week, so you won't be eligible anymore (unless you get new work). You do need to inform the tax credit office or you could have the money reclaimed at a later date, really hitting your cash flow. The tax credit won't be cut off immediately though, you should get a four week grace period.

Heads Up: Tax Credit Changes in Apr 2011

The Tax Credit changes announced by the government during the June 2010 Emergency budget don't start to take effect until Apr 2011. Until then everything's the same so families earning under £66,350 should check to see if they're eligible.

From next April most families with £40,000+ annual incomes will get fewer tax credits, while some on lower incomes will see the 'child element' increased by £150. The 'baby element' (extra cash for children under 1) is also being dropped.

In 2012 the income figure is dropping again to around £30,000 but the 'child element' will increase by a further £60.

James & Jeannette

Oct 2010

*Taken from research on the internet. Please check carefully re your own circumstances.