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Analysis: Childcare Tax Credits - Fair and simple solutions

The tax credits system has helped many families but is riddled with difficulties that can penalise those most in need, says Robin Williamson, technical director of the Low Incomes Tax Reform Group.

The Conservative party announced at its annual conference that tax credits will be restricted for families earning more than £50,000 if it wins the next General Election.

The Working Tax Credit (WTC), in particular its childcare element, has been a great boost to many working families who would have been unable to work but for the support afforded by the state.

The WTC is paid to certain people in work and on low earnings, while the childcare element - although structurally part of WTC - is paid along with the Child Tax Credit to the main carer of the children.

The childcare element is remarkably generous - 80 per cent of eligible costs, up to costs of £175 a week for one child (giving a maximum payable of £140) and £300 a week for more than one (giving a maximum of £240).

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