REV/C&E 3
7 March 2001
SUPPORT FOR FAMILIES AND CHILDREN
A package of measures announced today by the Chancellor will build on the commitment to focus resources on improving support for families with children - targeting the greatest help on those who need it most, when they need it most.
The package, which recognises the costs and responsibilities which come with parenthood, includes:
- increasing the Children's Tax Credit (CTC) so it will be worth up to £520 a year, or £10 a week, when it is introduced in April 2001. This is £1.50 above the rate announced in Budget 2000 and represents a tax cut for about five million families with children under 16, worth the equivalent of nearly 3p off the basic rate of tax for a single earner family on average earnings;
- to recognise the additional costs of a new child in the first year, from
April 2002 the CTC will be increased by a further £10 a week, (£520 a year) for families in the year of a child's birth. This means that it will be worth up to £20 a week (£1,040 a year) for some 500,000 families - increasing the basic adult credit in Working Families' Tax Credit (WFTC) and Disabled Person's Tax Credit (DPTC) by £5 a week from June 2001. The new rates, combined with the increases in the National Minimum Wage, will mean that the minimum income guarantee, for a family on WFTC, will rise from £214 a week in April to £225 a week in October 2001;
- ensuring that families getting Income Support and Job Seekers Allowance also see a rise in their income through a £1.50 increase in the child premia in Income Support and Job Seekers Allowance from the same date;
- increasing the limits for eligible costs in the childcare tax credit component of Working Families? Tax Credit and Disabled Person's Tax Credit from June 2001 to £135 for families with childcare costs for one child and £200 for families with two or more children, and the Government will also consider how to help families who need to use formal childcare in the home, for example by extending the childcare tax credit;
- an extension of the 10p income tax rate band by £300 over indexation, which will benefit 25 million taxpayers;
- cutting the cost of safety equipment by reducing VAT on children's car seats from 17.5 per cent to 5 per cent and removing VAT on the purchase of adult cycle helmets in line with the current relief for children's cycle helmets;
- helping families cut the cost of buying essential items for their children by modernising the VAT zero rate on clothing and footwear; and
- there are other non-tax measures to support families with children which are outlined in Treasury press release HMT 1.
NOTES FOR EDITORS
The Government has made a firm commitment to help families with children through the tax and benefit system, based on the following principles:
- recognising the costs and responsibilities which come with parenthood, by providing extra financial support for all families with children; and
- targeting help on those who need it most, when they need it most. This includes families on lower incomes, and those with a new baby.
Children's Tax Credit
The Children's Tax Credit was announced in Budget 99, to replace the Married Couple's Allowance. The new tax credit will be worth more than 2.5 times as much as the Married Couple's Allowance, and is targeted on families on low to middle incomes with children aged under 16: about 5 million families. Budget 2000 set the value of the allowance at up to £442 a year, and this Budget increases that to £520 a year, or £10 a week.
The allowance is reduced where the main earner in the family is a higher rate taxpayer.
From April 2002, the Chancellor announced that the credit for families in the year of their child's birth will be worth up to £1,040 a year, or £20 a week - over five times as much as the former Married Couple's Allowance. This recognises the extra costs associated with having a baby.
Working Families' Tax Credit and Disabled Person's Tax Credit
Over 1.1 million low income working families and disabled people benefit from Working Families' Tax Credit (WFTC) and Disabled Person's Tax Credit (DPTC). Families on WFTC are on average £30 a week better off than they would have been under the previous system of Family Credit. The Chancellor has announced a further increase of £5 a week over inflation in the basic adult credits in WFTC and DPTC which will take effect from June 2001. These increases will further improve the incentives to move into work and the incomes of low income working families. In combination with the increases in the National Minimum Wage, these increases will mean that the minimum income guarantee, for a family on WFTC with one child, will rise from £214 a week in April to £225 a week in October 2001. The corresponding minimum income guarantee for a couple with one child on DPTC will increase from £246 a week in April to £257 in October 2001. (These figures are based on one earner in full-time work -working 35 hours a week - receiving the National Minimum Wage).
Childcare tax credit
So far 124,000 families are currently receiving help with childcare costs through the childcare tax credit component of WFTC and DPTC. From June 2001, the limit of eligible childcare costs will increase from £100 to £135 for a family with childcare costs for one child and from £150 to £200 for a family paying for childcare for two or more children. These limits reflect recent evidence on the cost of childcare across the country, particularly for those with children under 5.
Some families, such as those with disabled children and those who work irregular hours, such as nurses, face particular childcare needs. The Government will consider how to help those families, who need to use formal childcare in the home, for example by extending the childcare tax credit.
VAT Measures
The Chancellor also announced that adult pedal cycle helmets will be zero rated for VAT, child safety seats will be charged at a reduced rate of VAT and the VAT relief for children's clothing and footwear will be modernised.
Further information is contained in the following Customs & Excise Budget Notices:
| C&E BN 37/01 | VAT: Zero-rating of pedal cycle helmets |
| C&E BN 56/01 | VAT: Reduced rate for children's car seats |
| C&E BN 63/01 | VAT: Modernising relief for young children's clothing and footwear |
INLAND REVENUE PRESS OFFICE
Media enquiries to: 020 7438 6692 / 6706 / 7327 (out of hours: 07860 359544)
Non-media enquiries to: 020 7438 6420 / 6425 (Office hours only)
Inland Revenue information is on the Internet:
External links
CUSTOMS AND EXCISE PRESS OFFICE
Media enquiries: 020 7865 5471 / 5472 Out of hours please call: 020 7620 1313
HM Customs and Excise information can also be found on the Internet at:
External links
PRESS RELEASE ANNEX
Working Families' Tax Credit (WFTC)
| £ per week | £ per week | £ per week | |
| 2000-01 |
2001-02 from April |
2001-02 from June |
|
| Basic tax credit | 53.15 | 54.00 | 59.00 |
| 30-hour tax credit | 11.25 | 11.45 | 11.45 |
| Child tax credits | |||
| Under 161 | 25.60 | 26.00 | 26.00 |
| 16-18 | 26.35 | 26.75 | 26.75 |
| Disabled child tax credit2 | 22.25 | 30.00 | 30.00 |
| Enhanced Disability Tax Credit (lone parent/couple) | N/A | 16.00 | 16.00 |
| Enhanced Disability Tax Credit (child)3 | N/A | 41.05 | 41.05 |
| Maximum eligible childcare costs allowed4 -1 child | 100.00 | 100.00 | 135.00 |
| Maximum eligible childcare costs allowed4- 2 or more children | 150.00 | 150.00 | 200.00 |
| Income threshold | 91.45 | 92.90 | 92.90 |
1 For awards starting from June 2000 for 2000-01.
2 From October 2000
3 Includes the disabled child tax credit for relevant awards starting from April 2001.
4 Childcare tax credit is 70 per cent of eligible childcare costs allowed.
Disabled Person's Tax Credit (DPTC)
| £ per week | £ per week | £ per week | |
| 2000-01 |
2001-02 from April |
2001-02 from June |
|
| Single person basic tax credit | 55.15 | 56.05 | 61.05 |
| Lone parent/couple basic tax credit | 84.90 | 86.25 | 91.25 |
| 30-hour tax credit | 11.25 | 11.45 | 11.45 |
| Child tax credits | |||
| Under 161 | 25.60 | 26.00 | 26.00 |
| 16-18 | 26.35 | 26.75 | 26.75 |
| Disabled child tax credit | 22.25 | 30.00 | 30.00 |
| Enhanced Disability Tax Credit (lone parent/couple) | N/A | 16.00 | 16.00 |
| Enhanced Disability Tax Credit (single person) | N/A | 11.05 | 11.05 |
| Enhanced Disability Tax Credit (child)2 | N/A | 41.05 | 41.05 |
| Maximum eligible childcare costs allowed3 -1 child | 100.00 | 100.00 | 135.00 |
| Maximum eligible childcare costs allowed3 - 2 or more children | 150.00 | 150.00 | 200.00 |
| Income threshold - single person | 71.10 | 72.25 | 72.25 |
| Income threshold - lone parent/couple | 91.45 | 92.90 | 92.90 |
1 For awards starting from June 2000 for 2000-01.
2 Includes the disabled child tax credit for relevant awards starting from April 2001.
3 Childcare tax credit is 70 per cent of eligible childcare costs allowed.
PRESS RELEASE ANNEX
Bands of taxable income 2001-021
| 2000-01 | £ a year 2001-02 | £ a year |
| Starting rate 10 per cent | 0- 1,520 Starting rate 10 per cent | 0- 1,880 |
| Basic rate 22 per cent | 1,521-28,400 Basic rate 22 per cent | 1,881-29,400 |
| Higher rate 40 per cent | Over £28,400 Higher rate 40 per cent | Over £29,400 |
1 The rate of tax applicable to savings income in section 1A, ICTA 1988, other than dividends, is 20 per cent for income falling between the starting rate and basic rate limits. The rates of tax applicable to dividends are 10 per cent for income below the basic rate limit and 32.5 per cent above it.
Income tax allowances 2001-02
| (£ a year) | |||
| 2000-01 | 2001-02 | Increase | |
| Personal allowance | |||
| Age under 65 | 4,385 | 4,535 | +150 |
| Age 65-74 | 5,790 | 5,990 | +200 |
| Age 75 and over | 6,050 | 6,260 | +210 |
| Married couple's allowance1 | |||
| Age less than 75 and born before 6th April 1935 | 5,185 | 5,365 | +180 |
| Age 75 and over | 5,255 | 5,435 | +180 |
| Minimum amount2 | 2,000 | 2,070 | +70 |
| Children's tax credit1 | - | 5,200 | - |
| Income limit for age-related allowances | 17,000 | 17,600 | +600 |
| Blind person's allowance | 1,400 | 1,450 | +50 |
1 Tax relief for these allowances is restricted to 10 per cent.
2 This is also the maximum relief for maintenance payments where at least one of the parties is born before 6 April 1935