Ok. Tax Credits:
There is no 'benefit' from being in a lone parent household except that you only need to work 16 hours to qualify for the childcare element of tax credits, which may pay up to 70% of childcare costs.
People think it's a complicated benefit, with lots of variations, but it isn't really. It's just a case of maths. You have to add up all your 'elements', then work out how your income affects them.
Let's say you work 30 hours per week as a lone parent with 2 children, neither of whom are disabled.
There are 3 elements - Working Tax Credits, Child Tax Credits and Childcare element of Working Tax Credits.
Working Tax Credit
1.Basic element £1,920
2.Couple and lone parent element £1,970
3.30 hour element £790
4.Disabled worker element £2,855
5.Severe disability element £1,220
Add up any that apply, write the total down somewhere. You qualify for elements 1, 2 and 3. Total: £4680
Child Tax Credits
1.Child Tax Credit Family element £545
2.Child element £2,720
3.Disabled child element £3,015
4.Severely disabled child element £1,220
Each child can qualify for each of elements 2-4, there is only one family element. Disabled child = Gets DLA. Severely disabled child = Gets High Rate Care or is registered Blind.
Add up any of elements 2-4 that apply (one for each child) and add on 1. Write it down next to the amount above. You qualify for 1. and 2x 2. Total: £5985
Child Care Tax Credits
Maximum eligible cost for one child £175 per week
Maximum eligible cost for two or more children £300 per week
Percentage of eligible costs covered 70%
The care has to be registered providers, but there is no restriction on when the care takes place. So if you want to pay someone to have your child on your day off while you do housework, they will still pay it. To qualify for the Child Care element, you must be either:
Lone Parent - work 16 hours or more
Couple - work 24 hours or more total, with one working at least 16 hours per week.
Disabled people, couples where one person is in prison, hospital or otherwise incapacitated for work, or in receipt of carer's allowance are exempt from the 24 hour rule, and are only required to work 16 hours per week.
Maximum eligible cost for one child £175 per week
Maximum eligible cost for two or more children £300 per week
Percentage of eligible costs covered 70%
So, work out child care costs, then calculate 70% of them. Write that down.
Let's say you pay £200 per week for 2 children. £200 x 70% = £140 per week - £7280 per year.
Add up the 3 figures. The total figure is your 'potential tax credit award'. For 'you' that's: £4680 + £5985 + £7280 = £17945 per year.
Your total potential tax credit award is £17945 per year.
Next, you have to look at your income. Let's say it's £15000 per year.
Income Thresholds
Income threshold £6,420
Withdrawal rate (per cent) 41%
Threshold for those entitled to Child Tax Credit only £15,910
Income rise disregard £5,000
Income fall disregard £2,500
So, they are telling us that the first £6420 of your income is ignored.
Take that away from your £10000 = £3580
Then, after you've taken that away, they will deduct £0.41 for every £1 you earn.
So, £3580 x 0.41 = £1467.80
They will take away £1467.80 from your tax credit award, so your total will be:
£17945-£1467.80 = £16477.20.
They always take away from working tax credits first, so your break down would be:
Working Tax Credits: £3212.20 (£61.77 per week)
Childcare Tax Credits:£7280 (£140 per week)
Child Tax Credits: £5985 (£115.10 per week)
So, your total Tax Credit income would be £316.87 per week.