BENEFITS EXPERT: Tax credits and child care...

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Q: I am a lone parent about to go back to work following maternity leave after the birth of my first child.

 My employers are offering me child care vouchers but say these could affect my Tax Credits, which are £2 a week. Would these vouchers be a good idea?

New Mum (Teesside)

A: If your baby is in Ofsted-registered childcare, you can claim extra Tax Credits to go towards the fees. For you this seems a better option than the vouchers.

 You can have 70 per cent of your child care costs added in to your Tax Credit calculation up to a maximum weekly charge of £175. So the maximum you could have added would be £122.50. Child care vouchers generally are of most help to people on higher earnings who do not qualify for Tax Credits.

 They are worth £55 a week for one child, but the parent usually has to pay for them by having their value deducted from their salary.

 Their value will also be deducted from the amount allowed for weekly child care costs in their calculation if they claim Tax Credits. The advantage of the vouchers is that the parent only pays tax and National Insurance on salary earned after the deduction of the vouchers’ cost.

 So a £55 voucher only makes you better off by £16 a week if you have had to pay for them.

 To make sure what is best for you, you may want to contact the Tax Credit Helpline on 0345 300 3900.

Q: I am thinking of buying my friend’s house as an investment and renting it back to her as my tenant. As she is not working because of disability, she would then claim Housing Benefit to pay the rent. Would she have to change address to live with her parents, as I am not sure how the council would view paying Housing Benefit to someone who had not technically moved?

Anon email

A: You cannot generally get Housing Benefit for the rent of a home that you have owned during the past five years. Furthermore, the council will not pay Housing Benefit for what they regard as a ‘contrived letting’. This is where they feel that a ‘landlord and tenant’ relationship has been created to take advantage of the Housing Benefit scheme.

 Your friend seemingly would not sell the property to anyone but you: you would not let it to anyone but her. As the only way she could pay the rent would appear to be from Housing Benefit, I am afraid I cannot see any council regarding the letting as being anything but contrived.