Policy background Changes to child tax credit
It was announced in the Summer Budget 2015 that, as part of the welfare budget savings, the maximum entitlement to child tax credit (CTC) would be restricted for families who become responsible for a child or children or qualifying young person(s) born on or after 6 April 2017. Section 13 provides for these changes to take effect from the 2017/18 tax year.
	The changes being made are:
Restricting the child element of CTC to two children per family:
The calculation of the maximum rate of CTC currently includes an individual element (£2,780 for the 2015/16 tax year) for each child or qualifying young person for whom the claimant or claimants (if claiming as part of a couple) is or are responsible. This is currently referred to as the 'individual element' of CTC. Currently, the individual element is paid at a higher rate of £2,780 plus £3,140 or £4,415 where the child or qualifying young person is disabled or severely disabled respectively.
The changes will restrict the individual element of CTC to two children per family where specified conditions apply. A claimant will only be entitled to an individual element for a maximum of two children or qualifying young persons unless they are claiming for more than two children or qualifying young persons who were born before 6 April 2017.
The restriction to the availability of the child element will be on a "rolling basis" so that when the eldest child ceases to be entitled to CTC, if there is a third child born on or after 6 April 2017, that third child will become eligible for entitlement. This will roll on to subsequent children as elder children cease to be entitled to the payment.
A new disability element will ensure that the equivalent of the higher amount of the individual element of CTC for disabled and severely disabled children will continue to be available:
The change will ensure that any disabled or severely disabled child or qualifying young person born on or after 6 April 2017 will qualify for the additional individual element regardless of the changes referred to in 29(a)(ii) above. This is achieved by the creation of a new disability element, which through changes to secondary legislation is intended to reflect the additional amount of the individual element currently payable for disabled and severely disabled children (for 2015-16, £3,140 and £4,415). This will be paid for all disabled children or qualifying young persons.
Removing the family element of CTC
The calculation of the maximum rate of CTC currently includes a family element. The calculation includes one family element (£545 for the 2015/16 tax year) regardless of the number of children or qualifying young persons for whom the claimant or claimants are responsible, and whether the children or qualifying young persons are disabled or severely disabled.
This change will remove the family element from all families who are only responsible for a child or qualifying young person who is born on or after 6 April 2017. The changes will take effect from 6 April 2017.