• CTC consists of a number of what are called 'elements'.



• You get one family element per family of £545 for 2008/09. If you have a baby of under one year you get the baby element of £545 as well.



• You will also get a child element of £2,085 for each child including those under one year.



• If your child is disabled you will also receive a Disability element of £2,540 for each disabled child and possibly in addition the Severe Disability element of £1,020.



• You may get a disability element if you receive Disability Living Allowance (DLA) for the child or the child is registered blind.



• If you receive the highest care component of DLA you may get the Severe Disability element.



• CTC will be paid to the main carer for all children in the family so if you are part of a couple you will need to let the Revenue know.



• You can get your payments weekly or monthly via your bank or building society account or into a new Post Office Card Account.

• WTC is a payment to top up the earnings of low paid working people whether employed or self employed. It includes those people who do not have children.

* If the claim is a joint claim and both partners qualify, the award will include two such elements per couple. However where an individual works enough hours to qualify for the 50plus 30 hours element, he or she cannot also receive the 50plus 16-29 hours element.

(#) If you qualify for the 50plus 16-29 hours element, you will not get the couple's element unless you have responsibility for a child or you qualify for the disability element of the Working Tax Credit.

• The amount of tax credits you receive depends on your circumstances - the number and age of your children, the number of hours you or your partner work per week, whether you are disabled, whether you are paying for childcare, and also on the amount of your annnual income or your joint annual income if you are a couple.



• Claims will initially be based on your income for the last complete tax year before you make your claim.



• Generally the income you will include in the claim form will be that which is taken into account when you pay tax. This will include salaries and wages including bonuses, holiday pay, overtime, profits from self-employment, taxable state benefits, pensions except war pensions, most income from savings and investments (unless they are tax free like ISAs).



• Apart from income from employment or self employment or taxable state benefits most other income need only be returned if it is more than £300 a year. If it is over £300 you need only include on your claim form the extra over £300, but note that if you claim as a couple the £300 applies to your joint income and not to each of you separately.



• Your capital such as money in your bank and building society accounts or the value of your property is not normally taken into account.



• Maintenance you receive and student grants are also ignored when claiming tax credits.

• The calculation is done on a daily basis by looking first at what is the maximum CTC/WTC you can claim.



• The Revenue then look at your income to see if you can have the maximum amount of tax credits or whether it will need to be reduced because of the level of your income.



• They should then send you an award notice telling you how much you will get and when the payments will start.



• If you receive Income Support or income based Jobseeker's Allowance you will receive the full amount of CTC that you qualify for.



• If you receive CTC only you will be entitled to the full amount of that tax credit until your annual income reaches £15,575.



• If you receive WTC on its own or with CTC and your annual income (or your partner's and your annual income) is below £6,420 you will receive the maximum amount of all the elements you qualify for.



• If your income is over £6,420 your maximum amount will be reduced in the order:

WTC (apart from child care element)

Child care element of WTC

Child element of CTC

Family element of CTC

• The family element of CTC will not be reduced until your annual income exceeds either £50,000, or (if higher) the point where all other credits – WTC and the child elements of CTC – are withdrawn. The family element is then reduced by £1 for each £15 of income you receive over £50,000, or (if higher) the point at which all WTC, childcare element of WTC, and individual child elements of CTC are tapered away.

• The Revenue calculate how much tax credit a claimant is entitled to by taking their income for the year, dividing it by the number of days in the year, then spreading it evenly day by day throughout the year.



• This method of calculation can produce some curious results if a person's income or circumstances change so that they become entitled to more or less tax credit. For example, if a person loses their job half way through the year, having been on a salary of (say) £40,000 per annum while they were working, their income for tax credits purposes will not be £20,000 for the first six months and zero for the next six months. Instead it will be £10,000 for each period of six months.



• Similarly if a couple with one child, start the year with one member working for a salary of £10,000 per annum, then after six months the other member takes a job paying £30,000 per annum, their income for tax credits purposes for the whole year will be £25,000 (£10,000 + 6/12 x £30,000). This is deemed to accrue evenly day by day throughout the year, so that tax credits income for the first six months will be £25,000 x 6/12 = £12,500 when actual income was only £5,000 (£10,000 x 6/12). Because in 2006/07 and subsequent tax years the first £25,000 of any increase in income over the level of the previous tax year is ignored when calculating tax credits entitlement, the couple's tax credits award will not change until the following year. However, before 2006/07, when only £2,500 increase in income was disregarded, this averaging was a major cause of income-related overpayments.



• Much confusion surrounds just what claimants must tell the Revenue, as opposed to what is advisable - but not necessary - for them to declare.

• It is not compulsory to notify any other change in circumstances or in income which alters the amount to which a claimant is entitled. But it is still advisable to tell the Revenue so that the award can be altered straight away, so as to secure a higher rate of credit or, as the case may be, to avoid having to pay back an overpayment later on.



• At the end of the tax year - the Revenue will send you a form setting out the information they hold about your claim including your circumstances and the income on which the award was based.



• Sometimes the Revenue will not require a reply unless there has been a material change in your circumstances which affects the amount you should receive. These are known as auto-renewal cases. But most people are required to complete the declaration attached to the form and give details of their income for the year just gone (2008/09 at the next renewal), and any changes in circumstances not already shown on the form. You must send back the completed form by 31 July 2009. The Revenue can then see if your award was right and make any changes to the award for the new tax year (2009/10).



• If your circumstances stayed the same during 2008/09 and your income did not increase over the year of the claim by more than £25,000 you should have received the right amount of tax credits.