Finding alternative sources of income to plug the holes in household finances has become critical for many families with children.
There are several child financial support options open to families, Child Benefit and Child Tax Credit. Although it should be noted, the UK government’s rollout of the Universal Credit scheme will merge Child Tax Credit into one credit with other benefit entitlements.
Claiming these benefits can be a big boost to your family budgets; even if you think you are not entitled to apply, you still should so you don’t miss out on other entitlements.
Child Benefit is paid out to somebody who is responsible for a child. This person may not necessarily be the child’s parent. Claiming Child Benefit is not dependent on whether you are working or not, or have savings. Applicants can claim Child Benefit if they have one of the following:
- Child aged under 16
- Child aged under 20 years but they are in an approved full-time education or training.
Although it should be noted that if your child is not in approved full-time education or training (maybe they get a job after leaving school), then recipients Child Benefit will cease for that child.
Payments are tax-free as long as neither parent or carer earns more than £50,000 a year (more on that below).
How much is Child Benefit?
In the 2018-19 tax year, recipients of Child Benefit are entitled to receive:
- £20.70 per week for your first child
- £13.70 a week for any further children.
So, for example:
A family with two children will receive £1,076.40 a year for the first child and £712.40 for the second child, a combined total of £1,788.80 annually.
A family with three children will receive £1,076.40 a year for the first child and £712.40 for the second and third children (£1,424.80), altogether £2,501.20 a year.
Child Benefit then can provide families with a top-up to their income in providing for their growing children.
What if I earn over £50,000 per year?
If either the applicant or their partner earns over £50,000 each tax year, they can still claim Child Benefit. However, they will need to begin paying back some as extra Income Tax; that is 1% of the total Child Benefit for each £100 of their income over £50,000.
If one person in the applicants household earns over £60,000 a year, then all Child Benefit must be repaid as extra Income Tax.
It can be worth continuing to claim Child Benefit and paying it back, depending on the applicant’s circumstances.
Child Tax Credit
Child Tax Credit can be confusing.
So first, let’s start with the simple bit:
Child Tax Credit is a benefit to help with the costs of raising children.
Who can apply for Child Tax Credit?
Applicants are entitled to apply if they are responsible for a child and the child is:
- Under 16
- Under 20 and in full-time education or training
Child Tax Credit has different qualifying elements depending on how many children the applicant has, if those children are disabled, if the applicant has childcare costs plus the applicants and their partner’s income.
The elements and their amounts are the following, per year, per child for 2018-19* (Please note these are up to amounts, depending on applicants income):
- Family Element – up to £545
- Childcare Element – up to £2,780
- Disabled Child Element – up to £3,275 (+ childcare element)
- Severely Disabled Child Element – up to £1,325 (+ childcare & disabled child elements)
Child Tax Credit Income limits and Childcare costs
When applicants apply for Child Tax Credit, the UK Tax Office will take into account their and their partner’s income (the household income) and whether they pay any childcare costs.
Applicants can obtain Child Tax Credits if they have the following incomes and children (2018-19):
Households with childcare costs:
- Annual Household Income of £40,000 and 1 child
- Annual Household Income of £55,000 and 2 children
- Annual Household Income of £65,000 and 3 children
Households without childcare costs:
- Annual Household Income of £25,000 and 1 child
- Annual Household Income of £35,000 and 2 children
- Annual Household Income of £40,000 and 3 children
To know precisely what applicants are entitled to, and how much they can expect to receive, use the UK government’s tax credit calculator.
Important to note for low-income families
If recipients are obtaining Child Tax Credit and their annual household income is £16,105 or lower, they will receive the full maximum amounts for each element they qualify for.
This is known as the ‘income threshold.’ All income earned above this amount will gradually begin to reduce the amount of tax credits awarded, roughly 41p for every £1 of income.
Applicants receiving both Working Tax Credit and Child Tax Credit will notice that their qualifying income threshold will be reduced.
What is Universal Credit?
Universal credit was introduced to make claiming benefits simpler. It is a benefit for working-age people with the aim of replacing six benefits and merging them into one payment.
Those six benefits are:
- housing benefit
- child tax credit (see above)
- working tax credit
- income support
- income-based jobseeker’s allowance
- income-related employment and support allowance
A single universal credit payment is paid directly into a claimant’s bank account to cover the benefits for which they are eligible.
Universal Credit has proved a controversial concept from its initial conception – the cost of the rollout, IT concerns and that millions of working families are actually worse off.
However, not all areas of the UK have the Universal Credit yet (the government did aim to complete this rollout by September 2018 but this has not occurred).
New applicants to family financial support should check first whether they have an area that provides Universal Credit first – they can do this here.
If there is no centre then new applicants should continue to apply for Child Benefit (not part of Universal Credit anyway) and Child Tax Credits as per the information listed above.
If Universal Credit applies to you
Make a claim for Universal Credit and apply as soon as possible as it can take up to five weeks for the first payment to be paid into claimants bank accounts.
The date an applicant applies is known as their ‘assessment date’, and this is the day the payment will be made. It is critical for applicants to note that Universal Credit is paid in arrears, so successful claimants will need to wait one calendar month from the date of the application before receiving their payments.
Payments can take up to seven days to reach bank accounts so the first payment could be five weeks away.
Knowing what you are entitled to can make a massive boost to your household income. Not only can it help fill the gaps where you are short each month, but it can also replace the temptation to borrow credit that your household cannot afford, or even the need to borrow money from friends and family.
For those who are savvy with their child financial entitlements, they can place the money aside for them or their children’s future in the form of savings and pensions. Remember though, a change in your financial circumstances must be updated to the UK Tax authorities; otherwise families will end up paying back the money they initially thought they were entitled to.
So check your circumstances, you could claim today to ease your financial situation.