Unemployed or on a low income and raising kids? You may be able to claim child tax credit to top up your income.
Raising a child is hard at the best of times.But if you’re unemployed or on a low income, it’s even more of a struggle. Luckily, you can claim Child Tax Credit to top up your income and help you keep up with the costs.
Here’s a rundown of the child tax credit system, how it works and how much you can claim in 2019. We’ll also have a look at Universal Credit. This is the new system that’s replacing child tax credit and other government benefits.
Child Tax Credit helps you cover the costs of raising a child. You can claim if you:
Earn more than £16,105 a year? The amount of child tax credit you can get will go down by 41p for every £1 you earn.
Child Tax Credit is made up of several elements. Depending on your circumstances, you may get one or more of these elements.
Here’s a look at all the child tax credit elements you could claim in the 2019-20 tax year and their maximum amount.
Let’s say you’re self-employed and your partner is a stay-at-home parent. You have two children. Your total profit is £15,000.
This means you could claim:
So, in total, you could claim £6,105 a year, which would raise your total yearly income to £21,105.
Let’s say you’re self-employed with two children. Your total profit is £15,000. However, your partner gets a job that nets them £15,000 a year. This would bring your total household income to£30,000.
You can claim:
However, because your household income is £13,895 over the £16,105 threshold, you won’t get the full £6,105. Instead, you’ll get 41p less for every £1 you earn over the threshold.
This means you’d get: £6,105 -(£13,895 x 0.41), that is £408.05.
Prior to 6 April 2017, you could claim the child element of Child Tax Credit for every child under 16 — or under 20, if they’re still studying — you were responsible for. But as from 6 April 2017, the government introduced a two-child limit.
If your child was born on the 6 April2017 or later, you can claim the child element of child tax credit only if they’re your:
Let’s say you have three children. All three were born before 6 April 2017. This means you can claim the child element of Child Tax Credit three times — £2,780 for every child.
Now, let’s say one of your children was born in May 2017. This means you’d be able to claim the child element only twice — £2,780 for your first two children, but not for the third one.
Yes, there are exceptions. The two-child limit doesn’t apply if:
The two-child limit and the rape clause have caused controversy. The Child Poverty Action Group has challenged the limit in court. Unfortunately, while the court did find part of it unlawful, it upheld the policy. The case is now pending appeal before the Court of Appeal.
“This is a policy which is not simply about what level of benefits predominantly working families are entitled to.Rather, it is a policy which necessarily encroaches upon very personal and intimate decisions about family size and planning and treats some children as less deserving of a benefit intended to meet their basic needs purely because of their birth order. We do not agree with the judge’s findings on the various human rights arguments and will look to appeal this case further.”
For now, the two-child limit is unfortunately still in force.
You can apply for Child Tax Credit only if you qualify and you’re currently getting the severe disability allowance. To claim, call HMRC on:
Lines are open Monday to Friday from 8am to 8pm, Saturday from 8am to 4pm and Sunday, 9am to 5pm.
Qualify for Child Tax Credit but don’t receive the severe disability allowance? You’ll have to apply for Universal Credit. This has replaced Child Tax Credit, as well as the following benefits:
You qualify for Universal Credit if you:
Universal Credit consists of two parts:
The Universal Credit standard allowance depends on your age and whether you live with a partner.
Depending on your circumstances, you can also get extra money alongside the standard allowance. The add-ons are:
As with child tax credits, your benefits go down for every £1 you earn over a certain threshold. The reduction is 63p for every £1 over the threshold — 22p more than the Child Tax Credit system.
The income threshold, called the working allowance, is also lower under Universal Credit. Under the Child TaxCredit system, the 41p per £1 earned reduction kicks in if you start earning more than £16,105. Under Universal Credit, the 61p per £1 reduction kicks in at:
There’s also a benefit cap — a limit to how much you can get. This is:
You can claim Universal Credit only by filling in an online application. If you get help from someone, you’ll still need to log on to the government website and fill in the online form. Your claim won’t start until you do this.
You’ll also need these documents:
Like Child Tax Credit, it can take up to five weeks for your claim to get processed. So, if you qualify, you should complete your application as soon as possible.
If you’re struggling to keep up with the costs of raising children, Child Tax Credit can be a lifeline.Unfortunately, its replacement — Universal Credit —has stricter requirements, lower income thresholds, a benefit cap and a longer application process.
Despite widespread criticism, the government is still rolling out Universal Credit. So, if you qualify, it’s a good idea to get your documentation together as soon as possible and get the ball rolling.
Need help? You can call the universal credit helpline free of charge on 0800 328 5644.