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New Child Tax Credit rules come into force today, here's what you need to know

By Neil_Shaw | Posted: April 06, 2017

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New Child Tax Credit rules come into force today and hundreds of thousands of parents will see their payments change.

New rules for the benefits were announced in 2015 by former Chancellor George Osborne, but have only come into force on April 6, the Hull Daily Mail reports.

The cuts to tax credits are expected to affect 515,000 families by 2020. We've looked at everything you need to know about how the changes could affect you.

What are the changes to child tax credit?

From Thursday, April 6, Child Tax Credit - which is worth up to £2,780 per child per year - will only be paid for the first two children in any family. Historically there has not been a limit on how many children a parent can claim for.

If your children were born before to this date, credits for three or more children will still be applicable.

However, if you have a third child on or after April 6 2017, you won't get any more money for the extra child.

The Government is also removing the family element - a payment of £545 for a newborn first child. Parents of children born before Thursday will still get this.

The Child Poverty Action Group and Institute for Public Policy Research warn the changes could push 200,000 children below the poverty line.

According to their report, working families with three children will be £2,870 worse off.

Who isn't affected?

  • Children already alive, IF their parents keep claiming without a long break
  • Children born through rape, but mum must prove it
  • Twins, triplets etc born to families who had one child
  • Children looked after by a 'friend or family carer'
  • Children who have been adopted (except by step-parents)
  • Disabled children, who are counted separately

What is Child Tax Credit?

Child Tax Credit is paid by the Government to low income families to help parents with the costs of bringing up a child. Couples make a joint claim, and if you're a single parent, the resident parent is usually the one to make the claim.

The amount of money parents are entitled to depends on factors including income and other circumstances. You do not need to be working to claim Child Tax Credit. Those responsible for children receive money for each child which qualifies. However the amount of children it helps per family is set to change.

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What's the difference between Child Tax Credit and child benefit?

Child benefit can be paid to anyone who is responsible for a child except in families where one parent's individual income is more than £50,000.

Child tax credit is a means-tested benefit – so how much you get depends on your income and other circumstances.

What support is there for childcare?

The new childcare offers scheme that the Government is now offering parents is now available as of March 22, as announced in chancellor Philip Hammond's Budget speech earlier this month.

This includes families looking to take advantage of the new Tax-Free Childcare scheme, as well as those that want to sign up to the new 30 hours' free childcare service, which launches later this year.

To register, parents are advised to complete the form on the government's new Childcare Choices website.

Chief secretary to the Treasury, David Gauke, said: " This government is on the side of working families and our childcare support will cut thousands of pounds off bills for millions of households, as well as supporting parents to return to or remain in work."

What is the new '£2,000 Tax-Free Childcare scheme'?

The 'Tax-Free Childcare scheme' - which is set to launch on 28 April - will see the government contribute 20p for every 80p that working parents spend on care costs each year.

This is the equivalent of the 20% tax many people pay on their earnings - hence the name 'tax free'.

It will offer as many as two million working families in the UK up to £2,000 a year for each child under 12, or £4,000 for disabled children (to the age of 17).

To begin with, the scheme will initially focus on parents with the youngest children (aged 2 or under) - before being rolled out nationally by the end of the year.

Am I eligible?

The scheme is good news for those who work for companies that don't offer childcare vouchers, and for the self-employed.

To qualify, parents will have to:

  • Be employed
  • Both adults must be earning at least £115 a week and not more than £100,000 each year.
  • Live in England

While both parents must be working to qualify, those temporarily absent from the workplace such as those on paid or unpaid maternity, paternity or adoption leave will still be eligible.

I get Employer-Supported Childcare - can I claim both?

No. Tax-Free Childcare is replacing Employer-Supported Childcare, including 'childcare vouchers', which is only available to parents if their employer offers it.

Employer-Supported Childcare will be closing to new entrants from April 2018, but parents who are already a member of the scheme will be able to remain in it as long as their employer continues to offer it.

How can I get involved?

Parents must express their interest online by pre-registering on the Childcare Costs website.

Your application will then be reviewed, and if successful, you'll be able to open an online account - provided by NS&I.

You then pay into this account, which is then topped up by the government to cover the cost of childcare.

For every £8 that families or friends pay in, the government will make a top-up payment of an additional £2, up to a maximum of £2,000 per child per year (or £4,000 for disabled children).

This top up is added instantly and parents can then send electronic payments directly to their childcare providers.

You can save more than £8,000 in each account but any extra will not earn a top-up.

30 hours' free childcare - what you need to know

On top of this, from September this year, parents of three-and-four-year-old children living in England will also be able to apply for a new 30 hours free childcare offer, which the government says is worth around £5,000 per child.

Eligible parents can benefit from both Tax-free Childcare and free childcare at the same time.

Parents will be able to apply online through the childcare service.

They will receive a code – this will allow parents to arrange their childcare place ahead of September 2017.

Parents can take their code to their provider or council, along with their National Insurance Number and child's date of birth. Their provider or council will check the code is authentic and allocate them a free childcare place.

For more information, the Childcare Choices website includes a Childcare Calculator for parents to compare all the support options available, and narrow down what works best for their families.

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