Tax Credits: Future policy

In this section you will find information about future tax credits policy changes which have not yet been implemented.

Most of the changes to the system from now on will be to aid the transition of tax credits claimants to Universal Credit. You can find the detail about the stopping of tax credits and transition to UC in our Universal Credit section of the site.

Limiting CTC to two children (April 2017)

The Summer Budget 2015 announcement limits CTC to 2 children from April 2017 and means that anyone who has a third child born on or after 6 April 2017 will not receive the child element for that child.  The Government confirmed that there would be some exceptions to this policy and in November 2016 they consulted on potential exceptions.

At the same time as the 2 child limit applies, the payments for disabled and severely disabled children will taken out of the child element and a new disabled child element (payable at two rates) will be created. This element will be available to all children if they meet the conditions even if they do not qualify for the child element because they are a third or subsequent child.

It was confirmed in a written parliamentary statement on 20 July 2016 that new claims from families with more than two children will continue to be taken in tax credits until November 2018. As a result of this announcement we expect some changes to the conditions for claiming UC in digital areas. See our UC section for further information.

Example: Assume Gita and David have 2 children in 2015/16 and have their third child on 6 April 2017.  Their 2015/16 award will be around £6,105. Their 2016/17 award is likely to be similar assuming their circumstances remain the same. In 2017/18, under the current rules they would have seen their award increase to around £8,885, however because of the new rules they will continue to receive around £6,105 in 2017/18 despite having an extra child.

The Government also announced that there would be some exceptions to this policy. A consultation was held in late 2016, with the Government response published in January 2017. The response confirmed that there will be exceptions for:

The Social Security Advisory Committee (SSAC) wrote to the Minister for Employment in February 2017 outlining some concerns about the draft secondary legislation in relation to the exceptions to the two child policy.

We are currently preparing more detailed information on the exceptions and this will be published shortly.

Removal of the family element (April 2017)

Currently, everyone who has responsibility for at least one child has the family element included in their award. From April 2017, the family element (set at £545) will only be included in awards where the person has responsibility for a child or young person born before 6 April 2017.

Example: Christopher and Diana have twins born on 6 April 2017. Under the current rules, their award would have been around £6,105. However, because of the new rules they will receive no more than around £5,560 in 2017/18. The reduction is due to the removal of the family element.

Overall impact

We have explained each of the changes above, however some tax credit claimants may be affected by one, two or all of the changes mentioned above meaning that the actual impact on you will depend on your circumstances and income (for more than one tax year).

It is important when looking at how the changes affect you to look at all changes including the increase in the personal allowance tax threshold, the new living wage premium and reductions or increases to other benefits, such as housing benefit, as well as changes to tax credits.

Updated 20 February 2017