The Low Incomes Tax Reform Group (LITRG) is calling on HMRC to clear up confusion over future levels of child tax credit thresholds. LITRG have conveyed these concerns in the following statement issued after last week's budget:
The Summer Budget 2015 announced that the working tax credit threshold would be reduced from £6,420 to £3,850 from April 2016. The Budget was surprisingly silent about the child tax credit threshold, which has led to confusion about what will happen from April 2016. We urge HMRC to confirm publicly the CTC threshold level from April 2016.
We explained the Summer Budget tax credit changes in our article published soon after the budget. In that article we explained that the threshold for WTC will reduce from £6,420 to £3,850 from April 2016 and that consequently the CTC threshold will reduce from £16,105 to £12,125. Some commentators have presumed that because there was no announcement about the change to the CTC threshold that it will remain at £16,105 (the 2015/16 rate).
The reduction of the CTC threshold was not mentioned in any Budget documents. However, since tax credits began in 2003, the threshold has always been calculated in the same way: WTC basic element + WTC second adult element x (100/WTC taper) + WTC threshold.
Therefore, following this calculation, we expect the CTC threshold will be £12,125 from April 2016 which is significantly lower than the current level.
