Claiming Child Benefits and Tax Credits — Are Your Employees Entitled?
Your employees may be entitled to additional tax benefits if they have a family. There are two types of benefits families in the UK can receive: Child Benefits and Tax Credits.
These financial supports are provided by the state not through PAYE. However, they are not automatically applied, so it is worthwhile employers and employees being knowledgeable on both, especially if you have employees that are entitled to parental leave. It is important to understand: who is eligible, how to claim and how much can be claimed. Therefore, this article will cover the must know basics of Child Benefits and Tax Credits.
Child Benefit is offered by the UK Government to a parent or guardian responsible for bringing up a child. This benefit is provided to help boost a standard family’s budget to assist with providing supplies for the child. This claim must be made before the baby is three months old to receive all backdated payments.
When it comes to the number of children that can be claimed, there is no limit to Child Benefit, all children that parent or guardian is responsible for can be claimed.
Child Benefits are for any child under 16 or for any child under 20 that is in approved education or training.
HMRC’s rules state a person is eligible for Child Benefit if they are responsible for a child by either living with the child or by paying at least the same amount as Child Benefit (or the equivalent in kind) towards looking after them.
Contributions can include:
- Birthday and Christmas presents
- Pocket money
It is important to note that only one parent or guardian can claim Child Benefits, regardless if the parents are separated and/or live in separate accommodation.
Furthermore, business owners and employees with a minimum household income of £50,000 may be subject to a charge on the benefit claimed. This is often overlooked by business owners but it should be taken into consideration when deciding if Child Benefits are of benefit to the family.
Child Benefits are not compulsory. You and/or your employees can choose to not receive Child Benefit payments. However, it is advised that business owners and employees should still fill in the claim form as it will help contribute National Insurance Credits which count towards your state pension. This also ensures the child of the parent or guardian is registered to obtain a National Insurance number when they turn 16 years old.
Choosing to not receive Child Benefit payments does not affect your entitlement. If you or an employee decides to start Child Benefits payments, they can be restarted accordingly.
How much will you and employees receive?
There are two Child Benefit rates applicable depending on the number of children the claim is made for:
- £20.70 weekly for the eldest child or only child
- £13.70 per additional child
In the event of a family splitting up, £20.70 per week will be paid for the eldest child who stays with you. If two families join together, the eldest child in the new family unit qualifies for the £20.70, with any additional children receiving £13.70. If both parents/guardians claim for the same child only one will receive Child Benefit.
When is payment received?
Child Benefit is paid every 4 weeks. Employees that are single parents or families on income support may be able to request earlier payments.
Application Process of Claiming Child Benefit
The application for Child Benefit must be conducted by the individual wishing to claim, it cannot be completed through a company’s payroll and it is not the responsibility of you, the employer, to provide assistance to your employees regarding Child Benefits.
However, how to apply for Child Benefit is a commonly asked employee question. Employers should direct their employees to the Child Benefit claim form from the Gov.uk website. Once filled in, the CH2 form should be sent to the Child Benefit Office along with the original birth certificate (this will be returned). If the birth certificate is not available this should be sent as soon as it is received.
It should be noted that Child Benefit can be claimed as soon as the child is born or they come to be living in the guardian’s home. It can take up to 12 weeks for a new claim to be processed by the Child Benefit Office.
Note that claims cannot be backdated after 3 months so it is of benefit to the applicant to apply before the baby is 3 months old.
For additional children there is no need to run a new application. Simply ring the Child Benefit helpline on 0300 200 3100 to have them added to the existing claim. This will require your National Insurance number and Child Benefit number.
Child Tax Credit
It is unlikely that you or your employees will be entitled to Child Tax Credit. Child Tax Credit was first introduced in April 2003 to help people on low income or out of work.
For most people, Child Tax Credit has been replaced by Universal Credit. To be eligible for Child Tax Credit you have to be eligible for Universal Credit.
The amount you can receive and make a claim for depends on when your child was born.
If all children are born before the 6th April 2017, you could get the ‘child element’ of child tax credit for all of your children and you would also receive the basic amount, also known as the ‘Family Element’.
If one or more of your children were born after the 6th April 2017, you can get the child element of the tax credit for up to two children and you would only receive the family element if at least one of your children was born before the 6th April 2017.
- Up to £545 = The Basic Amount (AKA Family Element)
- Up to £2,780 = For each child (AKA The Child Element)
- Up to £3,275 = For each disabled child (on top of the Child Element)
- Up to £1,325 = For each severely disabled child (on top of Child and Disabled Child Elements)
If you do think you or any of your employees may be eligible, direct them to the tax calculator to check.
Whilst it is unlikely that you or your employees are eligible for Universal Credit, the eligibility qualifications are:– The individual has low income or is out of work
– The individual is 18 or over (there are some exceptions for 16 to 17 year olds)
– The individual is under State Pension Credit qualifying age (or their partner is)
– The individual and the individual’s partner has £16,000 or less in savings collectively
– The individual lives in the UK
Payment of Child Tax Credits
HMRC pay out Child Tax Credits every week or every 4 weeks from the date of the claim up to the end of the tax year.
The best route to make a new claim for Child Tax Credit, is to call up HMRC on 0345 300 3900. However, it can take up to 5 weeks for HMRC to process a new claim, so we recommend claiming as soon as possible.
Child Benefit and Child Tax Credits are a great help to families in the UK. Whilst these are not an employer’s responsibility to manage, it would be in your employees’ best interest to know the benefits so that you can advise if required. Alternatively, your payroll bureau should be available to advise you and your employees on Child Benefit and Child Tax Credits.
If you aren’t sure how to do this, reach out to our Expert Payroll Bureau.