Child benefit, child tax credit, child trust fund CTF, childcare vouchers - financial benefits for children - by independent financial adviser John Bramwell

Benefits for Children

Are you receiving all your entitlements?

There are several State Benefits designed especially to help families with children. It is your right to claim them, even if you feel perfectly capable of providing for your family. Many people choose to place these benefits in investments for their children, rather than use the money directly.

Child Benefit - this is paid tax-free to the person responsible for bringing up children (usually the children's mother) under the age of 16 (or 18 if in full time education). The amount received is higher for the first child.

This benefit is not means tested and is not dependent on you having paid National Insurance (NI) contributions. In fact, whilst receiving child benefit your NI record is credited as if you were paying NI contributions, even if you are not in paid employment. This maintains your NI record, which can be important when other benefits are taken, eg. the State Pension.

Child Tax Credit and Working Tax Credit - provide an extra benefit to top-up the basic Child Benefit. The Working Tax Credit is only paid to employed or self-employed people who work at least 16 hours per week.

You are entitled to Child Tax Credit and Working Tax Credit if your annual income and your partner's annual income combined is no more than £58,175 (£66,350 if you have a child under one year old). The amount to which you are entitled is dependent on the number of children, your income, the hours that you work and how much paid child care you require.

These benefits are paid direct to your bank account.

If you have not done so already, it is essential that you claim these benefits from HMRC (Form TC600) as soon as possible, as your benefit will only have limited backdating.

Are you eligible for the Child Trust Fund?

Each child born from 1st September 2002 onwards is entitled to a £250 voucher from the Government. A small amount of interest may be added to take account of any delay in payment. The money is intended to encourage savings for children and can be invested tax-free. Relatives and friends will be able to top this up to a maximum of £1,200 per year, again tax-free. The Government also intends to add to the fund, on the child’s 7th birthday. Children cannot access the account until they are 18.

The choice of where to invest your CTF ranges from cash accounts to more equity backed products. When you are deciding which provider to use, you should look out for the expected performance over the long term (relative to the rate of inflation) and the charges taken from the fund.

Does your employer offer childcare vouchers?

Childcare vouchers are a tax-efficient way of paying for your childcare that could put an extra £900 in your pocket every year (£1,195 per year for higher rate taxpayers). You simply exchange part of your salary for the vouchers, and it should not cost your employer a penny. You then use your vouchers to pay for your childcare at a registered childcare provider.

Each parent in employment is allowed to exchange up to £55 of their salary per week for childcare vouchers. Income tax and National Insurance are not charged on this amount.