CPAG in Scotland Tax Credits Project: Factsheet 5

Tax credits for lone parents

Introduction
Child tax credit (CTC)
Working tax credit (WTC)
Claiming tax credits
How much tax credit
Child tax credit and benefits
Changes in circumstances
Overpayments
Further information and advice

Introduction

This leaflet looks at tax credits for lone parents. There are two types of tax credit; child tax credit and working tax credit. You claim them together and you may get either or both. Tax credits are administered by Her Majesty’s Revenue and Customs, referred to as the Revenue in this leaflet. This leaflet covers issues which are particularly relevant to lone parents, but which may also affect other claimants.

Child tax credit (CTC)

To qualify for child tax credit you must:

• be at least 16 years old;
• be responsible for a child (or children); and
• pass the residence and immigration tests.

Who counts as a child
Generally, a child or young person qualifies as long as s/he is:

• aged under 16, and up to 31 August after the child’s 16th birthday; or
• aged under 20 and in full-time non-advanced education or approved training (must have started or been accepted on course before age 19).

Non-advanced education is study below the level of degree, HND or HNC, and includes standard grades, Highers and advanced Highers, SVQ up to level 3 and National Certificates. In order to be full-time, the course must be more than 12 hours a week during term time. Approved training courses are Skillseekers, Modern Apprenticeships, or Get Ready for Work courses, but only if the training is not provided by a contract of employment.

If you have separated from your partner and the child lives with both of you in a shared care arrangement, you can decide between you who should claim for the child. If you cannot agree and you both claim for the same child, the Revenue will decide who has the main responsibility for the child.

Working tax credit (WTC)

As a parent, if you are normally working 16 hours or more a week, you may be entitled to working tax credit as well as child tax credit. This can be working as an employee or self-employed.

Childcare element
As a lone parent working 16 or more hours a week, you can claim help with childcare costs through working tax credit. The amount you can get is only 70% of your actual costs, up to a maximum limit, so your childcare costs are never covered in full. If you are not working at least 16 hours a week, there is no help with childcare available through tax credits. The childcare must be provided by a registered childcare provider. For more information, see CPAG in Scotland’s leaflet Tax credits and childcare

Claiming tax credits

You claim child tax credit and working tax credit on the same form, TC600. This is available from the Tax Credits Helpline (0845 300 3900, textphone 0845 300 3909).

As long as you are a lone parent, you make a single claim for tax credits. If you become part of a couple, you must tell the Revenue. Your single claim ends and you must make a new claim as a couple with your new partner.

If you are already getting child tax credit and you start work, you must report this change in order to start getting working tax credit. If you are starting or stopping work, you can make a claim and provide information for tax credits, income support/jobseeker’s allowance, housing benefit and council tax benefit at a Jobcentre Plus at the same time.

The Revenue sends you a form to renew your claim from April each year.

How much tax credit

Child tax credit awards are made up of a number of elements relating to your children. The basic maximum works out as £59.36 a week for the first child and £48.93 a week for each other child, but you may get less than this because of your income, or more, depending on your children’s circumstances. Additional elements apply depending on whether any child has a disability. You can continue to get your maximum child tax credit with an income of up to £15,860 a year, depending on your children’s circumstances. People on incomes of up to £40,000 a year can still receive at least £10.43 a week. There is no upper income limit so you may still be entitled on an income of over £40,000, especially if you have a large family, disabilities or childcare costs.

Working tax credit awards are made up of a number of elements relating to your circumstances. The basic maximum for a lone parent works out as £74.06 a week, but you may get less than this because of your income, or more, depending on your circumstances. Additional elements can apply depending on childcare costs, your age, how many hours you work and whether you are disabled. You can continue to get your maximum child tax credit and working tax credit with an income of up to £6,420 a year, or sometimes more, depending on your circumstances.

Adding together the CTC and WTC elements for your circumstances gives you the maximum tax credits award, but the amount you receive depends on your income in a complete tax year (from 6 April to 5 April). For more information see CPAG in Scotland’s leaflet Tax credits – the basics.

Child tax credit and benefits

If you are claiming child tax credit for your children and you are not in work, you may be able to claim one of the following benefits for yourself:

• Income support (IS) if you are:
  
  • a lone parent with a child under 7 (proposed to reduce to 5 from January 2012); or
  • a carer of a disabled adult or child; or
  • in some other limited circumstances.
• Income-based jobseeker’s allowance (JSA) if you are able to work, available for work and looking for work – you are allowed some flexibility due to caring responsibilities or availability of childcare.
• Income-related employment and support allowance (ESA) if you are sick or disabled.
• Pension credit (PC) at some point after your 60th birthday (the age at which you can claim is gradually increasing to 65 in 2018). You may get the guarantee credit or, if you are over 65, the savings credit.

As long as you are getting any one of these benefits, your income level does not affect your child tax credit and you are automatically entitled to your maximum amount, but see below if an overpayment is being recovered. If your benefit stops, you should tell the Tax Credit Office.

If you have been receiving additional IS/JSA for your children since 2004
Before tax credits were introduced, people claimed income support (IS) and income-based jobseeker’s allowance (JSA) for the whole family including the children. Now these benefits only include amounts for adults, with child tax credit and child benefit paid for children. However, people who have been getting IS or income-based JSA since before 6 April 2004 may still be getting child additions in with these benefits, rather than claiming child tax credit. If you claimed one of these benefits after 5 April 2004 you should already be getting child tax credit (CTC).

The government intends to transfer everyone onto child tax credit in future, but not before 2012. However before this happens, lone parents are being moved off income support when their youngest child reaches a certain age (see below).

Most people still getting additional IS/JSA for children do not need to take any action. They get the same amount now as they would on child tax credit.

You can choose to claim CTC now rather than the child premiums and allowances in IS or JSA. Before deciding whether to claim CTC, you should ask the jobcentre for a ‘better-off’ calculation to compare your income before and after claiming CTC. If you won’t be better off there is no point in claiming before being transferred. Also, you may want to consider some of the effects of transferring to CTC, such as if you stop getting IS or JSA, you will no longer be able to access social fund budgeting loans or community care grants. Housing benefit and council tax benefit may go down because tax credits are taken into account in working out how much you get. Some other help is also based on receiving CTC at a certain rate – see Tax credits: a passport to other help for more information.

Lone parent benefit changes when youngest child reaches age 7
As a single person with a child under the age of 7 (note that it is proposed to reduce this to age 5 from January 2012, but the detail of how this will be implemented is not available at the time of writing) you can claim income support as a lone parent. When your child reaches his or her 7th birthday, you are expected to look for work and claim income-based jobseeker’s allowance (JSA) instead. You are allowed to restrict your availability for work to school hours for a child under 13, or depending on suitable childcare.

If you were getting IS with amounts for children since before April 2004, (as described above), and you are moved onto JSA, your new JSA claim won’t have amounts for children included. You will need to claim CTC.

Students
If you were getting income support amounts for children since before April 2004 (as described above), and you become a full-time student, you may be better off switching to child tax credit. This may be worthwhile, even though in some cases you may be allowed to remain on income support after your child has reached the age limit. This is because most student income is disregarded for tax credits. However, it is always important to get advice on the full implications of claiming CTC.

Changes in circumstances

Relationship changes
If your circumstances change, you should notify the Revenue. In particular, if a partner moves in to live with you, your single person claim ends and you must make a new claim as a couple. This also applies if you get married or register a civil partnership, even if you are not living together. The new award may be for a lesser amount and can only be backdated 93 days so it is very important to report this change immediately to avoid an overpayment or a penalty. If your relationship ends and you go back to being a lone parent, you must also report this change and you can make a new claim as a single person in the same telephone call.

Other changes which you must report include:

• You stop working at least 16 or 30 hours a week.
  
• You stop being responsible for a child.
  
• A young person leaves full-time education.

The Revenue has the power to impose a £300 penalty if you fail to notify one of the changes that you must report within one month, or up to £3,000 may be imposed for making incorrect statements in a tax credits claim. If this happened when you were part of a couple, a joint penalty may be imposed on you and your ex-partner. You may be able to avoid a penalty if you did not know and could not reasonably have known that your ex-partner had given incorrect information. There is a right of appeal against a decision to impose a penalty.

Starting and stopping work
If you are starting work of 16 hours a week or more, adult benefits usually stop, but you may still be entitled to some housing benefit and council tax benefit. You will continue to receive child tax credit and may also start to receive working tax credit as well. You do not need to fill in a new claim form but you must notify the Revenue that you have started work of at least 16 hours a week. The amount of child tax credit you receive will only be reduced after you have earned more than £15,860 in a complete tax year. For more information, see CPAG in Scotland’s leaflet, Tax credits and going back to work.

If you stop work, you must notify the Revenue and you will be entitled to a four week run-on of working tax credit. If you stop work due to illness or go on maternity leave, you can still be entitled to working tax credit for a limited period. If you go back onto income-based benefits, you will be entitled to maximum child tax credit, (except for during the four-week run-on after stopping work).

Other changes
There are other changes which do not carry the risk of a penalty but which it is in your interest to report. These include where a child joins the household (for example the birth of a new baby) and where a child loses or gains entitlement to disability living allowance.

Where changes of circumstances increase your maximum entitlement (because you would become eligible for additional elements) it is important to report these as soon as possible because the increase can usually only be backdated for up to three months.

Where changes decrease your maximum entitlement (eg, where a child loses entitlement to the disability element) it is important to inform the Revenue to avoid an overpayment building up.

The Revenue has a checklist of the circumstances it expects you to confirm and report. Check your tax credits award notice, TC602(SN) is sent with award notices and is also available on the Revenue’s website. Please also see CPAG in Scotland’s leaflet, Tax credits and reporting changes for more information.

Overpayments

Overpayments of tax credits are common, especially due to relationship changes (see above). An overpayment happens if you are paid more tax credits than you are entitled to for the year. This is likely to happen if you fail to report a change of circumstances immediately, or if the Revenue makes a mistake. You will usually be asked to pay back the money, unless you can show that you claimed correctly and the Revenue was at fault. The Revenue usually recovers the overpayment from you by deductions from your ongoing award of tax credits. However, if the overpayment was from a different claim, for example if you were part of a couple, they will ask you to repay in a lump sum or you can ask to pay in instalments.

If an overpayment arose when you were part of a couple but are now single, the Revenue should ask you and your ex-partner to each repay no more than 50% of the amount owed. You can ask for the amount to be reduced if it is causing you financial hardship, or make a complaint if you do not feel the Revenue has acted fairly.

If you are getting IS, income-based JSA, income-related ESA or PC, the maximum amount which the Revenue should deduct from an ongoing award for the same household is 10%. If you are having difficulty managing on your remaining income you should contact the helpline about this.

For more information about overpayments, including how to challenge them, see CPAG’s leaflet Tax credit overpayments.

Further information and advice

CPAG in Scotland Tax Credits Project summary webpages

Child Poverty Action Group in Scotland
0141 552 0552 advice line for advisers on benefits and tax credits,
Monday to Friday 10am to 12pm

Email: advice@cpagscotland.org.uk
email advice for advisers on benefits and tax credits

CPAG publishes the Welfare Benefits and Tax Credits Handbook, a comprehensive guide to benefits and tax credits for claimants and advisers.

CPAG in Scotland’s advice line is only for advisers. If you are having problems with your own tax credit or benefit claim and are in need of advice you should contact your citizens advice bureau or other local welfare rights service.

HM Revenue and Customs
Tax Credit Helpline 0845 300 3900
(textphone 0845 300 3909)

Website: www.hmrc.gov.uk

© Child Poverty Action Group, April 2011

This fact sheet was last updated April 2011

Child Poverty Action Group is a charity registered in England and Wales (registration number 294841) and in Scotland (registration number SC039339). Company limited by guarantee registered in England (registration number 1993854). Registered office: 94 White Lion Street, London N1 9PF

CPAG in Scotland’s Tax Credit Project is funded by the Scottish Government.