Child Tax Credit (from April 2003)

Child Tax Credits are changing: don't lose out

Nine out of ten families - nearly 6 million parents - are now eligible to claim the Child Tax Credit (CTC) which was introduced in April 2003. CTC will be paid to the main carer (including a stay-at-home dad) and is worth £10.40 a week for most families.

Child Tax Credit replaces both Children's Tax Credit and Working Families Tax Credit. It is made up of two parts, the child element which helps lower income families, and the family element which will benefit all parents - married or unmarried - earning up to £58,000 a year between them and bringing up children aged up to 16, or up to 18 in full-time education.

Some of the families who will benefit most from the new tax credit are families where one parent stays at home and the other is a higher rate tax payer. Under the old system they were excluded from receiving the credit, now most will receive it.

Parents on lower incomes will be able to claim more, as the new tax credit will incorporate the old Working Families Tax Credit and Family Credit benefits. For example, parents earning £10,000 a year with one child will receive £38 a week. Those with two children will receive £65 a week, and those with three children will get £93 a week.

During the first year of a child's life, parents can claim the "Baby Tax Credit" worth up to £20 a week, and parents on incomes up to £66,000 can claim.

The tax credits are tax-free, but you must claim promptly as they can only be backdated for up to three months (unlike other tax allowances). Payments must be made into a bank or building society account.

The tax credit system has been criticised because it is quite complex and that may deter some families from claiming. The claim form is similar to a tax return. It has 56 questions and a 47 page booklet of advisory notes, although it is possible to claim online, and the advantage of doing so is that you will only be asked relevant questions based on the information you supply. It is also possible to save the form while seeking out the documentation you need (such as National Insurance Numbers and P60s). The introduction of CTC was hampered by computer problems that finally appear to have been sorted.

How to apply