Tax Credits: 2 child limit policy

This page explains the new 2 child limit policy that comes into force for child tax credit from 6 April 2017.

Please note that the policy is new and the full details of how it will work in practice are not yet available. We are in the process of producing a more detailed guide for advisers on the 2 child limit and tax credits which will be available in the next few weeks. In the interim, this text is taken from the LITRG website for claimants to give an overview of the new policy.  

On this page where we talk about a child it includes any child under 16 or qualifying young person aged 16 or over and under age 20 who you are responsible for.

What is the 2 child limit policy?

In the 2015 Summer Budget the Government that the child element of child tax credit (CTC) would be limited to two children for those born after 6 April 2017 unless certain exceptions apply.

Prior to 6 April 2017, the child element of CTC was paid for each child or qualifying young person that the claimant (or their partner) was responsible for.

The change means that anyone who is responsible for a child born on or after 6 April 2017 will not receive the child element for that child unless:

The child element of child tax credit will continue to be paid for all children born before 6 April 2017.

Even if the child element is not payable for your child, it is important that you still report the birth or a child or a child joining your household to HMRC as soon as possible and no later than one month after it happens to make sure you don’t lose out on any related payments. This is because you may still be entitled to the child disability element of CTC or the childcare element of working tax credit. These amounts are not affected by the 2 child limit policy. It will also mean that if one of your other children move off the claim, the child not receiving a child element may then qualify for a child element. If they are already on the system, this should happen automatically.

Existing tax credit claimants

If you are already claiming child tax credit on 6 April 2017, you will continue to receive a child element for each of the children on your claim (born before 6 April 2017).

If you become responsible for a third or subsequent child born after 6 April 2017, you will not receive a child element for them unless one of the exceptions explained below applies.

Example 1

Dominic and Josie have four children (born in 2003, 2008, 2011 and 2016). In 2016/17 their tax credit claim included four child elements – one for each child.

Their 2017/18 tax credit claim will also include four child elements – because all of the children were born before 6 April 2017 the family are not affected by the 2 child limit policy.

Example 2

Daisy and Mike have two children born in 2012 and 2015. In 2016/17 their tax credit claim included two child elements.

In May 2017, their third child is born. They will not receive a child element for their new child because the baby was born after 6 April 2017 and they are already receiving child elements for two other children.

Example 3

Molly has two children born in 2012 and 2015. In 2016/17 her tax credit claim included two child elements.

In May 2017, Molly gives birth to her third child. Under the normal rules, Molly would not receive a child element for her third child because the baby was born after 6 April 2017 and she is already receiving child elements for two other children. However, Molly meets the conditions for a non-consensual conception exception (see below) and so a third child element is included in Molly’s tax credit award.

Example 4

Pete and Millie have one child born before 6 April 2017. In May 2017, their second child Freddy is born. They will receive the child element for Freddy because they are not already claiming for two or more children.

However, if Pete and Millie go on to have a third child in say September 2018, they will not receive the child element for that child unless an exception applies because they will already be claiming for 2 children.

Some tax credit claimants may find themselves responsible for a child through adoption or other friend and family care arrangements. If you are already claiming a child element for two children, you may not receive a child element for them. However, if the child is born after 6 April 2017, they are the third child on your claim and they are younger than other children on the claim then one of the exceptions below may apply so that you will receive a child element for them.

Example 5

May is a single parent. She claims CTC for her two children who were born in 2010 and 2012 respectively. In May 2017, she adopts a baby. Under the normal rules, she would not receive a child element in respect of her new baby because she is already claiming for two other children. However, she can claim an adoption exception meaning she will receive the child element for all three children.

If May was to give birth to a fourth child in July 2018, she would not receive the child element for that child unless one of the other exceptions applied.

The rules become more complicated if you become responsible for a child born before 6 April 2017 when you are already claiming for two children and one or both of them were born after 6 April 2017.

Example 6

Sven and Celine have two children – Anna (born in 2010) and Elsa (born on 1 May 2017). They claim CTC for both children. In August 2018, they adopt a third child – James who was born in 2013. They want to claim CTC for James.  

As James was born before 6 April 2017 he is entitled to the child element of CTC – no adoption exception is required. However, by adding James to the claim, the child element will be removed from for Elsa. This is because the couple are already claiming the child element for 2 or more children (Elsa and James).

However, the rules allow for an exception in this situation – Elsa will receive an exception as the first or second child because certain conditions are met and so the couple will receive child elements for all three children.

New tax credit claimants

If you are making a new claim for tax credits after 6 April 2017, you may be affected by the 2 child limit policy if you are trying to claim for more than 2 children.

A child element will be included on your claim for all children born before 6 April 2017.

Example 7

Iris and Daniel make a new claim for tax credits in July 2017. They have four children, all born before 6 April 2017. They will be entitled to a child element for each of the four children because they were all born before 6 April 2017.

Example 8

Jonathan and Anne make a new claim for tax credits in July 2018. They have four children. Matilda and Jake were born in 2010 and 2012 respectively. Kristen was born in May 2017 and Milo in June 2018.

Starting with the earliest born child:

  • The child element will be included for Matilda because she was born before 6 April 2017
  • The child element will be included for Jake because he was born before 6 April 2017
  • The child element will not be included for Kristen because she was born after 6 April 2017 and the child element has already been allocated to 2 or more children (Matilda and Jake)
  • The child element will not be paid for Milo because he was born after 6 April 2017 and the child element has already been allocated to 2 or more children (Matilda and Jake)

A child element could only be included for Kristen or Milo if one of the exceptions below applies.

What happens if I move in with a new partner?

If you are a single claimant and you become part of a couple, you will need to inform HMRC as soon as possible and they will end your single claim. You will then need to make a new joint claim.

Example 9

William is a single parent with two children – Ross (born 2010) and Jennifer (Born 2012). He claimed tax credits in 2016/17 and his claim included a child element for each child. In July 2017, William moves in with Victoria who also has two children – Rachel (born 2012) and Devin (born 2014). Victoria’s tax credit claim also included two child elements.

In July 2017, both single claims are ended and the couple make a new joint claim. As all of the children were born before 6 April 2017, the couple will have four child elements included in their new claim.

However, a newly formed couple could receive less child elements that they were previously receiving as single claimants if any of the children are born after 6 April 2017.

Example 10

John is a single parent with two children – Jason (born 2010) and Janna (born 2012). He claimed tax credits in 2016/17 and his claim included a child element for each child. In September 2018, John moves in with Christine who also has two children – Connie (born 2014) and Christopher (born May 2017). Christine’s tax credit claim also included two child elements.

In September 2018, both single claims are ended and the couple make a new joint claim. However, they will only receive 3 child elements – for Jason, Janna and Connie. They will not receive a child element for Christopher and the 2 child limit policy applies and none of the exceptions (see below) apply.

What are the exceptions to the 2 child limit?

Children born after 6 April 2017 and who are classed as the third (or subsequent) child on the claim may qualify for an exception so that a child element can be included for them. 

When working out if a child is the third child on the claim in order to claim an exception, an ordering process is used starting with the earliest date first. The date used will either be the date of birth of the child (if the claimant is a parent or step-parent of the child) or the date the claimant became responsible for that child) in any other case.

There are five exceptions:

  1. Multiple birth
  2. Adoption
  3. Non-parental care arrangements
  4. Where a child of the claimant has a child of their own
  5. Non-consensual conception

Multiple birth

The purpose of the multiple birth exception is to recognise that families do not normally plan for a multiple birth.

In some cases, a multiple birth will not need an exception. For example, if you have twins and claim CTC for the first time – the twins will each receive a child element because you are not already receiving a child element for any other child.

The multiple birth exception will be needed where:

The first child in a multiple birth will only get the child element if they are the first or second child on that claim. If they are not, then you will not receive the child element. For all other children in the multiple birth (other than the first born) you will receive a child element for each of them due to the multiple birth exception as long as you remain responsible for at least two children born as part of the multiple birth.

Example 11

Chester and Roseanne are claiming working tax credit. They have no children. In May 2017, Roseanne gives birth to twins. As the couple are not claiming for any other children, no exception is required and the child element will be paid for each child.

Example 12

Assume that Chester and Roseanne from Example 1 had Triplets in May 2017 (rather than twins). The first child would attract the child element of CTC because there are no other children on the claim. The second child would also attract the child element of CTC. However, under the normal rules no child element would be payable for child 3 because Chester and Roseanne are already claiming for at least two children (child 1 and child 2).

The multiple birth exception means that in this case – a child element would be payable for Child 3.

Example 13

Elliott and Justine have two children who were born before 6 April 2017. In May 2017, Justine gives birth to twins – Dexter and Diane. Under the normal rules, no child elements would be paid for either Dexter or Diane, because the couple are already receiving child elements for two other children (born before 6 April 2017).

As Dexter is the first child in the multiple birth and isn’t the first or second child on the claim – no child element will be paid for him as no exception applies.

However, a child element will be paid for Diane because she is the second child in the multiple birth and the multiple birth exception applies.

Adoption

The adoption exception will apply to your child if they have been:

The exception will not apply if:

Example 14

May is a single parent. She claims CTC for her two children who were born in 2010 and 2012 respectively. In May 2017, she adopts a baby. Under the normal rules, she would not receive a child element in respect of her new baby because she is already claiming for two other children. However, she can claim an adoption exception meaning she will receive the child element for all three children.

If May was to give birth to a fourth child in July 2018, she would not receive the child element for that child unless one of the other exceptions applied.

Non-parental care arrangements

This exception will apply where you or your partner are a friend or family carer of the child. A ‘friend or family carer’ means a person who is responsible for the child and any of the following apply:

It can also apply in an informal situation where:

The exception will also apply where you are responsible for the child and any of the first 6 bullets above applied immediately prior to the child’s 16th birthday and since that date you have continued to be responsible for the child.

The exception will NOT apply if you or your partner are the parent of the child or step-parent of the child.

Where a child of the claimant has a child of their own

This exception is intended to cover situations where a child or qualifying young person that you are responsible for (and receive a child element of CTC for) has a child of their own. The CTC rules allow you to claim CTC for your child and their child. This situation is common where the claimant is the parent of one child who has a child of their own (i.e. the claimant’s grandchild).

However, if you claim this exception and go on to have another child of your own, you will not receive a child element for your own child unless one of the other exceptions apply.

Non-consensual conception

This exception applies in relation to a child where:

The rules go on to explain what  ‘did not have the freedom or capacity to agree by choice’ means. It includes (but is not limited to) circumstances which at the time the child was conceived:

Personally connected in this context means that B is in an intimate personal relationship with you or you live together and are members of the same family or have previously been in an intimate personal relationship with each other.

The claimant and B are members of the same family if, at or around the time the child in question is conceived:

The behaviour has a serious effect on a claimant if it causes the claimant to fear, on at least two occasions, that violence will be used against them or it causes the claimant serious alarm or distress which has a substantial adverse effect on their day to day activities.

What happens if I am given an exception for my child?

If you claim an exception for a third or subsequent child, then you will receive a child element for them.

Unfortunately, the complicated rules mean that in some cases, getting an exception for one child could cause another child already on your claim to lose a child element. A special exception has been created to ensure that this does not happen.

Example 15

Nancy is a single parent who is claiming CTC for two children:

  • Joanna – born in October 2013
  • Keaton – born in May 2017

In July 2018, Nancy has a third child – Callum. Under the normal rules, Nancy would not receive a child element for Callum because she is already claiming for two other children. However, the circumstances surrounding Callum’s conception are such that the non-consensual conception exception applies. This means that Nancy is entitled to the child element for Callum.

However by adding a child element for Callum, Keaton loses his child element. This is because Keaton was also born after 6 April 2017 and a child born after that date can only qualify for a child element if:

  • There is no more than one other child on the claim; or
  • An exception applies

Now that Callum is on the claim, Keaton fails to qualify because there are two other children on the claim.

This was obviously not the intention when the 2 child policy was introduced and so the special exception ensures the child element will be paid for the ‘displaced child’ (i.e. the child who has lost the child element). This will happen where:

How do I claim an exception?

The main point to remember is that you must claim the exception at the time you add the child to the claim, if you don’t, you may miss out on the child element. If you realise at a later date that an exception should have applied, HMRC say they will only backdate the child element one month.

HMRC will require evidence that the child meets the exception conditions in most cases except for multiple births (which can be established from information already given).

How does the 2 child limit affect universal credit?

The 2 child limit policy will apply to universal credit, however the rules are different to tax credits. We have a separate section about universal credit.

The basic principle is that for an interim period (initially between 6 April 2017 and 31 October 2018, but following several measures announced in the Autumn Budget 2017, this period is expected to be extended to 31 January 2019) UC claimants will receive a child element for the first and second child but no child element will be paid for the third or subsequent child unless:

The practical effect of transitional protection is that all children or qualifying young people born before 6 April 2017 will receive a child element.

As a result of measures announced in the Autumn Budget 2017, the roll-out of UC full service changed, with an expected completion date put back to 31 December 2018 instead of September 2018. This is likely to mean that the interim period which applies to the 2-child policy transitional protection is also extended, meaning that from 1 February 2019 (rather than from 1 November 2018), new claimants of UC will only receive child elements for the first and second children. Third and subsequent children will not receive a child element unless an exception applies – no matter their date of birth and even if they were born before 6 April 2017. The amendments to the planned schedule will require legislation changes and we will update the section once the position is confirmed.

There will be some protection for people who have claimed UC, child tax credit or some other benefits with child elements in the preceding 6 months.

Existing UC claimants, at that time, will continue to receive child elements for any child or young person who they are responsible for and who was born before 6 April 2017.

For children born after 6 April 2017, if they are the first or second child on the claim, then a child element will be paid for them. However if they are the third or subsequent child, they will only receive a child element if an exception applies (see above).

You can read more about the 2 child limit in UC in our UC section

How does the 2 child limit affect other benefits?

The 2 child limit policy also affects income support, jobseeker’s allowance and housing benefit claimants whose applicable amount includes an amount for a child or qualifying young person. Similar rules apply in respect of exceptions for the third child. For housing benefit claimants, the exception will be based on any exception given by HMRC for child tax credit and we are waiting for more information about housing benefit claimants who do not receive child tax credit. 

Where can I find more detailed information?

We are currently preparing a detailed guide for advisers on how the 2 child limit works for both tax credits and universal credit. We will update this page as soon as the guidance is ready.

Last reviewed/updated 11 December 2017