Children's Tax Credit

The Children's Tax Credit was introduced from 6 April 2001 to provide more help for people who have a child or children aged under 16 living with them. It will reduce the income tax that you need to pay. You will get the credit through your tax code. You will be able to claim only one Children's Tax Credit, even if you have more than one child living with you.

To give more support to families on lower incomes, the Children's Tax Credit will gradually be withdrawn where the person claiming it pays tax at the higher rate. It will be withdrawn at the rate of £1 of credit for every £15 of income taxed at the higher rate.

You can claim Children's Tax Credit if all of the following three conditions apply:

1. If you have a child who lives with you for at least part of the tax year for which you are claiming.
2. The child was under 16 years old at the beginning of the tax year for which you are claiming.
3. The child is your own (including stepchild or adopted child) or a child that you look after at your own expense. It is accepted that you look after a child at your own expense if you meet at least half the total cost of raising the child whilst they live with you.

You can claim for any child under 16 at the beginning of the tax year for which you are claiming but it usually makes sense to claim for the youngest child. You will be able to claim only one Children's Tax Credit even if you have more that one child living with you. If the child doesn't live with you at all, you cannot claim the Children's Tax Credit.

If your child lives with someone else for part of the year and that person also claims the Children's Tax Credit for that child, you will have to decide between you on how you are going to share the credit. You should contact your Inland Revenue Office for more information or advice.

You pay Income Tax at the higher rate if your income from all sources less allowable reliefs and deductions is above a certain amount. Children's Tax Credit is gradually withdrawn if either of you (or both of you) is a higher rate taxpayer, at the rate of £1 credit for every £15 income taxed at the higher rate. If you are not sure whether you pay tax at the higher rate, contact your Inland Revenue Office.

The partner with the larger income must claim the credit, so the credit will be withdrawn from that partner. To make sure that your claim is correct, you may wish to discuss this with your partner. You will not be able to share the credit or transfer it to the partner with the lower income.

A married couple or a man and woman living together as husband and wife can share one Children's Tax Credit between them as long as neither of them pay tax at the higher rate. If you do not expect to pay tax at the higher rate in the tax year:

1. You can decide that one of you should have the whole credit; or
2. You can decide that you should share the credit equally between you.

There is no tax advantage if you decide to share the credit or if you decide that one of you should claim the full amount, but if one of you does not pay enough tax to use all of the credits allocated to you, you will be able to transfer the surplus credit to your partner only after the end of the tax year.

Whatever you decide to do will continue as long as neither of you start paying tax at the higher rate or decide to change who gets the credit. To change who gets the credit contact your Inland Revenue Office.

Contact your Inland Revenue Office if your personal circumstances change, as it may affect the amount of your Children's Tax Credit, for example if you have a baby, you separate, or you change your mind as to how you want to share the credit.

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