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CLAUSE 52: AMOUNT OF CHILDREN’S TAX CREDIT IN 2001-02

SUMMARY

1.         This clause specifies the amount of children’s tax credit in 2001-02 at £5,200, given at the rate of 10 per cent, instead of £4,420.

DETAILS OF THE CLAUSE

2.         Sub-section (1) provides that the amount of £4,420, specified in section 257AA(2) Income and Corporation Taxes Act (ICTA) 1988 as the amount by reference to which the children’s tax credit is to be calculated, is to be replaced by the amount of £5,200.  In accordance with section 256(2) ICTA 1988, relief for that amount is given at 10 per cent.

3.         Sub-section (2) ensures that the new amount of children’s tax credit of £5,200 applies from 2001-02.

BACKGROUND NOTE

4.                  This clause increases the amount of children’s tax credit from £4,420 to £5,200 at 10 per cent.  From 2001-02, the credit will be worth up to £520 off an individual’s tax bill, instead of £442.

5.         The children’s tax credit was introduced by Section 30 and Schedule 3 of the Finance Act 1999 and takes effect in 2001-02.  Section 34 of Finance Act 2000 increased the amount of children’s tax credit from £4,160 to £4,420.

6.         The credit will be available to individuals who have one or more children under 16 resident with them.  Only one credit is available to a family.  For families with a higher rate taxpayer, the credit will be gradually withdrawn depending on the amount of income in the higher rate band.