Child Tax Credit and the rules for claiming it explained

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Q. I am claiming Child Tax Credit for my eight-year-old. I have spoken to my ex-husband and he is also wanting to claim Child Tax Credit. Is this possible?

A. A child can only be named on one tax credit claim at any particular time. Child Tax Credit should be paid to the person who the child normally lives with – which can be unclear in cases with shared care.

If two people cannot decide between themselves who should apply, then HMRC will make a decision on who has the more valid claim and will pay that person.

Where there is more than one child and the parents share care, the parents could consider claiming Child Tax Credit for one (or more) child each as a way of splitting the payments.

Q. I have a spare room and I have thought about taking in a lodger. I was wondering if this would affect my benefits. I am claiming Jobseekers’ Allowance, Housing Benefit and Council Tax Reduction.

A. The Housing Benefit that you receive will be based on you needing one bedroom, but if you took in a lodger it would be based on you needing two bedrooms.

For Jobseekers’ Allowance, the DWP will disregard £20 of the income you receive from the lodger, the remainder will be taken into account as income.

If you provide meals (for a boarder, rather than a lodger) then 50% of the remainder is also ignored.

As long as you receive some Jobseekers’ Allowance then there will be no deduction from your Housing Benefit.

Q. I’ve been thinking about taking 25% of my occupational pension tax free and using it to pay off my mortgage. A friend has warned that it could affect my Jobseekers Allowance if I do. Is that correct?

A. Jobseekers’ Allowance is a means-tested benefit and you must declare if you receive any lump sum payments such as a pension payment if it takes your savings and capital to more than £6,000.

Capital of more than £6,000 would have some effect on Jobseekers Allowance and anything over £16,000 would cause the benefit to stop.

The Department of Work and Pensions would want to know where the capital had gone, and if they felt that you had intentionally deprived yourself of that capital in order to claim benefits then they can treat you as still having it in the bank.

The DWP will often accept paying off debts that are ‘immediately repayable’, so long as they do not believe that part of your intention was to increase your benefit entitlement, but they have had concerns about paying off mortgages where the amount is not due immediately and the capital could therefore have been used to supplement your own income as an alternative to claiming benefits.

Unfortunately, this there is no black and white answer and each case will in the end be decided on its own merits.