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Government policies

Tax credits and predecessors

Working tax credit (WTC)
(replaced working families tax credit and disabled persons tax credit)

Starting dates April 2003: introduced


Uprated annually in April of each year

Key department Treasury
Key delivery agency HM Revenue & Customs and employers
Budget/target/comment

Increases the level of tax credits for people with dependent children and extends them to some people without dependent children.

Three types of family are eligible:

a) Households with dependent children where at least one partner works at least 16 hours per week (maximum of 87 per week if working at least 30 hours and 72 if working 16-29 hours).

b) Households without dependent children where at least one partner is aged 25 or over and works at least 30 hours per week (maximum of 87 per week if a couple and 51 per week if single).

c) Workers with a disability who work at least 16 hours per week (maximum as per the other family types plus up to 49 for the disability).

Subject to eligibility, the maximum is available for households with an average weekly income of up to around 123.  For each pound above this level, the amount of reduces by 39 pence.  So, some working tax credit will be available up to weekly incomes of around 350.

Includes an additional component to help cover the costs of childcare for those households where all partners work at least 16 hours per week (up to 80% of the costs paid up to a maximum amount - 175 for one child and 300 for 2+ children).

Savings are not taken into consideration.

See the HM Revenue & Customs site for the latest information on rates.

Child tax credit (CTC)
(replaced children's tax credit and child allowance within income support)

Starting dates April 2003: introduced
 

Uprated annually in April of each year

Key department Treasury
Key delivery agency HM Revenue & Customs and employers
Budget/target/comment

Replaced the Children's Tax Credit and the child-related part of the Working Families Tax Credit.  Also replaced the child elements of Income Support and Jobseeker's Allowance.

Subject to a mean-test, available to any household with dependent children (up to age 19 if child in full time education), whether or not anyone in the household is working.

The maximum credit available depends upon the number and age of the children in the household, but is around 10 per week plus 43 for each dependent child.  So, for example, the maximum available to a family with two adults and two children both over the age of 1 is 96 per week.

Such a family would be entitled to this maximum with an average weekly income of anything up to around 350 (i.e the amount at which Working Tax Credit has fallen to zero - see above).  Above this level, the credit reduces by 39 pence for every extra 1 in income until all but 10 of it has disappeared.  The remaining 10 a week 'family' element remains undiminished until household income incomes exceed around 1,000 per week.

See the HM Revenue & Customs site for the latest information on rates.

Working families tax credit (WFTC)
(replaced Family credit)

Starting dates

October 1999: introduced
October 2000: uprated
April 2001: uprated
October 2001: uprated
April 2002: uprated
June 2002: uprated
October 2002: uprated

April 2003: replaced by a combination of Working Tax Credit and Child Tax Credit

Key department Treasury and DWP
Key delivery agency HM Revenue & Customs and employers
Budget/target/comment

The level of the credit dependent on the number of children, how many hours worked (the minimum is 16 hours), childcare costs and levels of savings.

When first introduced, guaranteed a weekly gross income of 200 for a family with one full-time worker.  No tax until 235 per week for families with one full-timer (55p taper, down from 70p under the Family Credit scheme that it replaced).

Minimum income guarantee raised to 208 in October 2000, 214 in April 2001, 225 in October 2001, 227 in April 2002, 230 in June 2002 and 237 in October 2002.

Only available to those with savings of less than 8,000, with decreased eligibility for those with savings between 3,000 and 8,000, implying total expenditure of around 6 billion.

Included a childcare allowance of up to 70% of childcare costs for working parents, up to a limit of 100 for one child and 150 for 2+ children (from October 1999) and 135 for one child and 200 for 2+ children (from April 2001).

In its final year (2002), Working Families Tax Credit paid an average of 86 a week to 1.4 million households.

Take-up was estimated to be around 85%.

Disabled persons tax credit
(replaced disability working allowance)

Starting dates

October 1999: introduced
April 2001 : uprated
October 2001: uprated
April 2002: uprated
June 2002: uprated
October 2002: uprated

April 2003: replaced by the Working Tax Credit

Key department Treasury and DWP
Key delivery agency HM Revenue & Customs and employers
Budget/target/comment

Originally guaranteed a weekly income of 231 for a couple with one child.

Minimum income guarantee raised to 246 in April 2001, 260 in April 2002, 263 in June 2002 and 264 in October 2002.

Operated like the Working Families Tax Credit, except no children required to be eligible.

Children's tax credit
(replaced married couples' allowance)

Starting dates

April 2001: introduced

April 2003: replaced by the Child Tax Credit

Key department Treasury and DWP
Key delivery agency HM Revenue & Customs and employers
Budget/target/comment

Payable to anyone paying tax who has a child aged 16 or under (implemented as a reduction in the tax bill of the claimant).

Maximum tax reduction of 529 per annum.  This compares with 197 for the Married Couples' Allowance which it replaced.

Maximum amount for the family element given to those on an annual income of 32,750 or less.  For every 15 above this, 1 deducted.

Increases in child allowance within income support

Raised by 2.50 per week in November 1998, by a further 4.70 per week in October 1999, by a further 1.10 per week in April 2000, by a further 4.35 per week in October 2000, and by a further 3.50 per week in April 2002.
Starting dates

November 1998: uprated
October 1999: uprated
April 2000: uprated
October 2000: uprated
April 2002: uprated

April 2003: replaced by the Child Tax Credit

Key department DWP
Key delivery agency Jobcentre Plus
Budget/target/comment

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