Childcare Element withdrawal rate

Sambelina

Hi,

I am trying to get information on the income threshold after which the Childcare Element of tax credits are reduced, as well as the rate at which they are reduced, so I can estimate a future award. Most websites state that you can claim 70% of childcare costs, up to £175 a week for one child (I have a 3 year old who has Childcare costs of around £160 a month). Some state that you can claim UP TO 70%. I can't find anywhere that states the threshold or taper rate though. Last year in my award it did mention a 'reduction due to income' of the childcare element, but there wasn't enough information to work out how it was calculated, and when I phoned them the helpline just told me it depended on your circumstances so they couldn't tell me. Can anyone help?? Thank you!

Icequeen99

Sambelina wrote: »

Hi,

I am trying to get information on the income threshold after which the Childcare Element of tax credits are reduced, as well as the rate at which they are reduced, so I can estimate a future award. Most websites state that you can claim 70% of childcare costs, up to £175 a week for one child (I have a 3 year old who has Childcare costs of around £160 a month). Some state that you can claim UP TO 70%. I can't find anywhere that states the threshold or taper rate though. Last year in my award it did mention a 'reduction due to income' of the childcare element, but there wasn't enough information to work out how it was calculated, and when I phoned them the helpline just told me it depended on your circumstances so they couldn't tell me. Can anyone help?? Thank you!

There isn't a threshold as such.

Simplified the steps are:

1. Add up all of your WTC elements (excluding childcare)

2. Work out your maximum annual childcare amount (amount per month x 12 x 70%)

3. Add up all of your CTC elements


Then take your annual household income used to calculate your award (which will be either an estimate for 17/18 or actual income for 16/17).

From that income figure take away £6420 and then x the result by 41%. That will give you a reduction due to income figure.

You then start setting that reduction due to income figure against the elements as above. First set it against the WTC only elements, then childcare and then CTC.

So for example if you had:

WTC elements £3000
WTC childcare £4000
CTC £2000

And your reduction due to income was £8000 then you would set £3000 against the £3000 WTC which wipes it out to £0. You would then carry £5000 forward and set against the childcare element. That would reduce it to Nil. Then you would carry the remaining £1000 forward to set against CTC - leaving your award as £1000 CTC.

If you reduction due to income was say £5000 - you would set £3000 against WTC only - reducing that to Nil. Then the remaining £2000 would be set against the childcare element, reducing that to £2000. So you would receive £2000 of the childcare element and £2000 CTC in the example above.

Even if the childcare element is reduced to Nil, you get more CTC than you would have done if you didn't have childcare costs. So don't just look at the childcare element.

Hope that makes sense.

Some links that might explain it better:

https://www.litrg.org.uk/tax-guides/tax-credits-and-benefits/tax-credits/how-do-i-calculate-tax-credits

http://revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/calculating-tax-credits/#Calculating tax credits 2012-2013