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Claiming Tax Credits And Benefits – Part 4: Maternity Pay And Child Benefit

July 1, 2014

1st July 2014

Are you worried about money as a property investor?

Would you like to claim tax credits and benefits to boost your income?

The Diagnosis

Tax and money issues need to be diagnosed in order to be understood and a remedy to be implemented.

There may come a time when one member of the household decides it is best that they become a full time investor. There are a few factors that they need to be worked out before this can happen though. One of the major considerations is “how much money can you survive on until property generates enough income to sustain the family’s financial needs”?

We have written several articles to enable you to make more money as a property investor:

Part 1: Child tax credits
Part 2: Working tax credits
Part 3: Tax credits examples
Part 4: Maternity pay and child benefit

Part 4: Maternity leave and child benefit

Maternity leave

Most women get Statutory Maternity Pay (SMP) or Maternity Allowance (MA) for the first:

26 weeks of ordinary maternity leave

13 weeks of any additional maternity leave

This can be followed by up to 13 weeks of unpaid leave.

For the 26 weeks of ordinary maternity leave, and for the first 13 weeks of additional maternity leave, (a total of 39 weeks), whether or not you are getting SMP or MA, you are still treated as being in work and able to claim Working Tax Credit. This is providing you and your partner (if you have one), worked the required number of hours applicable to your circumstances immediately before going on maternity leave. (see BLOG) This also applies if you are self-employed.

If you are a first-time mother, you can claim Working Tax Credit from the date of birth of your first child. This is providing you and your partner (if you have one), usually worked the required number of hours applicable to your circumstances, immediately before going on maternity leave. (see working tax credits)

When the 39 weeks (this includes 26 weeks of ordinary maternity leave and13 weeks additional maternity leave) are over, you continue to be eligible for Working Tax Credit if you begin work again at that point. Any further additional maternity leave does not count as being in work. You must tell HMRC within 1 month if you do not go back to work after the 39 weeks.

Help with the costs of childcare

You may be able to get more Working Tax Credit to help with the cost of registered or approved childcare. This is the childcare element of Working Tax Credit. The childcare element can help with up to 70% of your childcare costs, up to a maximum cost of £175 a week for 1 child and £300 a week for 2 or more children. This means that the childcare element is worth up to:

• £122.50 a week (70% of £175) for families with 1 child

• £210.00 a week (70% of £300) for families with 2 or more children

You can get help with up to 70 per cent of your childcare costs – subject to a maximum limit in the amount of childcare costs you can claim each week. (2)

Your childcare provider needs to be registered in one of the following ways.

o Registered on the Ofsted Early Years Register (EYR) if your child is under 5 years of age.

o Registered on the Ofsted compulsory part of General Childcare Register (GCR) if your child is aged 5 to 7.

o Registered on the Ofsted voluntary part of the General Childcare Register if your child is aged 8 or over.

Childcare provided by a school: If your child is either 3 or 4 years old, this type of care will also count as approved if both of the following apply.

o Your childcare is provided under the direction of the school’s governing body or the person responsible for managing the school.

o The childcare takes place on school premises or on other premises that may be inspected as part of an inspection of the whole school by Ofsted or an equivalent inspection body appointed to inspect certain independent schools. For example, the Independent Schools Inspectorate, Bridge Schools Inspectorate or the Schools Inspection Service. (2)

Using childcare provided by a school: If your child is between 5 years and 15 years old (or 16 years old if your child is disabled) this type of care will count as approved for tax credits if all of the following apply.

• Your childcare is provided out of school hours.

• The care is provided under the direction of the school’s governing body or under the direction of the person responsible for managing the school.

• The care is provided on the school premises, or on other premises that may be inspected by Ofsted or by an equivalent inspection body appointed to inspect certain independent schools (for example, the Independent Schools Inspectorate, Bridge Schools Inspectorate or the School Inspection Service). An example of other premises could be a village hall used by the school for it’s out of school hour’s childcare activities.

Early education for 3 and 4 year olds: All 3 and 4 year olds who are being looked after by schools or by childcare providers registered on the EYR are entitled to free early education of 15 hours a week for 38 weeks of the year. You do not need to pay for a child’s early education place and do not have to take up additional services to access their free place. Some 2 year olds in English local authorities may also be entitled to free early education of between 10 and 15 hours a week. You can’t claim help for these free entitlements. You can, however, claim for any additional childcare you pay for outside of the free entitlement. (2)

The amount you get will depend on your income and will be paid directly to the main carer along with Child Tax Credit. To claim the childcare element you must be 16 or over.

You can claim:

o as soon as you start paying for childcare, or

o up to seven days before your childcare starts.

You need to claim help with childcare costs within one month of when you start to use them – HMRC can’t pay you for any costs you have had before that. (2)

You can only claim childcare costs for any child up to:

o the Saturday following 1 September after their 15th birthday or

o the Saturday following 1 September after their 16th birthday if

— the child is on the blind register or came off it in the last 28 weeks or

— you get Disability Living Allowance or Personal Independence Payment for that child.

If you are a lone parent, you must work 16 hours a week or more. If you are in a couple, both of you must work 16 hours a week or more (1) (2).

Only one partner needs to work 16 hours a week or more if the other is:

o incapacitated

o an in-patient in hospital

o in prison either on remand or serving a custodial sentence

o entitled to Carer’s Allowance

You can’t claim for any of the following.

• The amount you get from your employer towards your childcare costs
(either in cash or in vouchers) — this includes vouchers in return for a reduction in your pay (known as a ‘salary sacrifice’).

o Childcare costs met by your local authority (or your local education authority) for early learning or nursery education for your child – for example where your local authority in England meets the cost of 15 hours a week free early years education for children aged 3 and 4.

o Payments you get from the government towards your childcare costs because you are a student or you are starting work.

You can still claim for any childcare costs that you actually pay for.

So for example, if your employer pays only some of your childcare cost in vouchers, and you pay for the rest, you can make a claim for what you pay.

Child Benefit

If you are claiming Child Tax Credit because you are responsible for a child or qualifying young person, you may also be entitled to Child Benefit.

If you have not already done so, you should make a claim for Child Benefit. (1)

Child Benefit can only be backdated for up to 3 months from the date your claim is received in the Child Benefit Office, so it’s best to make your claim straightaway to avoid losing money.

You should claim Child Benefit as soon as:

o your child is born

o a child or young person that you are responsible for comes to live with you

o you adopt a child who is living with you

o you start to contribute to the cost of looking after a child that you are responsible for (unless the person the child lives with is already getting Child Benefit for them) and the amount you contribute must be the same as, or more than, the weekly amount of Child Benefit you get for that child

You can get a claim form in any of the following ways.

o From the Bounty Pack that’s given to new mothers in hospital.

o Go to www.hmrc.gov.uk/childbenefit

o Phone the helpline on 0300 200 3100 or if your preferred language is

o Welsh phone 0300 200 1900.

o Textphone the helpline on 0300 200 3103.

You can calculate the amount of tax credits that you can claim by going to the below URL:
https://www.gov.uk/tax-credits-calculator

If you are looking for an accountant or thinking of changing your current accountant because they do not understand property investing and tax implications then please Click Here To Book an “Initial Free Consultation”.

Download our FREE Property Investors Guide, Call Us on 0115 946 1991, To Email Click Here, Follow Us on Facebook or Tweet Simon Here

Please ensure that you check out our latest webinars and courses Property Accounting & Investment Webinars

References:

1. A Guide To Child Tax Credit and Working Tax Credit

2. Working Tax Credit – Help with the Costs of Childcare

3. Child Tax Credit and Working Tax Credit – An Introduction

4. Child Tax Credit – An Overview



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Telephone: 0115 939 4606
Email: simon@optimiseaccountants.co.uk