Budget changes to child tax credits - anyone know what it means for childcare payments?

[KirstyJC]

I am getting confused by all the reports on child tax credits and I wondered if one of you clever lot are better at understanding this than me!

We currently get child tax credits, plus some credits towards the cost of childcare. We don't qualify for the working tax element as our income is too high, although it's under 40k.

I see in the newspapers that from next year if we earn over 40k we won't get any child tax credits - does anyone know if this means no childcare element as well? This would mean we would be significantly worse off even if our income went over 40k - can this be right? (in other words we currently get more in tax credits than the difference between current income and 40k would be, so if we got nothing at 40k we would lose out). Surely that would be penalising people for working which is the opposite of what they seem to be saying??

Also in one paper it said that the tax credits were nothing from next April for incomes over 40k, dropping to 26k for the following year ie 2012. Does that mean with joint income of over 26k we would get absolutely nothing at all? With childcare costs of about 10k a year? I must be missing something, please.....?!?!?!

Run your stats through this budget effect calculator as a first measure.

CTC is calculated on gross income with childcare costs taken into account. If the end number is below a certain threshold then you qualify for assistance. At the moment, if you have one child and no childcare costs then you get the same £545/year with a family income of anything between £26k and about £55k.

From 2011 you will get £545/year if you have one child, no childcare costs and an income

Oh OK, so it takes childcare costs into account - that is a relief as we pay almost £10k childcare and DH earns less than £15k full time.....might not be as disastrous as it first looks.

I couldn't find any calculators that asked about childcare, will try your link above.

Many thanks!

All the CTC calculators are based on this year's rules as, presumably, the thresholds and rules for 2011/12 haven't been finalised yet. But if you go to this calculator you can see the effects of childcare costs on the calculation by entering different amounts. Keeping your income the same set childcare at £10k, then £5k and then at £0 to see the difference.