Making sense of the changes to Tax Credits


Money | by | 30th Nov 2015

After the announcement last week that the proposed cuts to tax credits were scrapped by Chancellor George Osborne, there was a big sigh of relief for some families.

However, there are two different types of tax credits, working tax credit and child tax credit.

Only working tax credits were spared any further changes, cuts to child tax credits are still going ahead.

tax credits

Photo credit:  Tax credits via Flickr

This means that:

  • As of April 2017, if you’re making a new claim for child tax credit you’ll only receive support for the first 2 children in your family.  If you have a large family but stop claiming for more than 6 months, it will be considered a new application when you decide to claim again.
  • If you’re already claiming support for a larger family this will continue but eventually everyone will be moved over to Universal Credit – which will include and replace any support received through working tax credit or child tax credits.
  • In addition to the 2 child limit the ‘family element’ of £545 per year will be removed completely.

Still confused? Its not an easy system to understand, something we’ve been told by a number of parents we’ve met with including a parent group at Y Bont in Gwynedd. The group suggested the following website that offers an up-to-date calculator to help you work out what you’re entitled to:  http://www.entitledto.co.uk/

To find out more about Working Tax Credit and who is supported:  https://www.gov.uk/working-tax-credit

To find out more about Child Tax Credit and who is supported:  https://www.gov.uk/child-tax-credit

To find out who Universal Credit will affect and how:  https://www.moneyadviceservice.org.uk/en/articles/who-is-affected-by-universal-credit

So in a nutshell:

  • those claiming working tax credits won’t see any changes
  • child tax credit will be capped for large families in the future
  • all families claiming will lose £545 and eventually all of these payments will be replaced by Universal Credit as it is introduced.

If you have a question about changes to benefits that you’d like a finance professional to answer, please write in the comments below or Contact Us.

 


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