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November 2011

The effect of DLA on Tax Credits

by Chris Briggs

My partner and I work, use registered childcare and are entitled to tax credits. My son has just been diagnosed with a disability and I have been told he can get DLA but only the low rate. What does this mean and how will it affect my income?

Disability Living Allowance (DLA) is a tax-free benefit for disabled children and adults to help with the extra costs they may have due to their disability.

DLA has two 'components', paid at different rates depending on the effect of the disability:
• The care component - if you need help looking after yourself or supervision to keep safe, paid at low, middle or high rate.
• The mobility component - if you can't walk or need help getting around, paid at low or high rate.
Some people will be entitled to one component, others may get both.

DLA is paid over and above any other benefits you may receive, but is not normally included in your household income when calculating your tax credits and income-related benefits.
In your son’s case it is the care component of DLA which is being paid, at the low rate. Through this entitlement you will also be eligible for the ‘disability element’ of Child Tax Credit.
The only other benefit you are entitled to is Child Benefit which is not affected.

What if he gets worse and moves to a different rate of DLA?

Should your son’s condition change leading him to become entitled to the high rate care component of DLA, you will be entitled to the ‘severe disability element’ of Child Tax Credit as well as the previous disability element. There is no change if he moves to middle rate care.

What if one of us has to give up work to look after our son?

In this case your tax credits will change due to both the reduction in your household income and the absence of childcare costs.
By giving up your job, you may become entitled to Carer’s Allowance. To be eligible for this benefit you must be caring for your son for at least 35 hours per week, have net weekly earnings below £100, and DLA being paid at middle or high rate care. Carer’s Allowance is paid at £55.55 per week.

Childcare for All?

For many parents, having a child with a disability further exacerbates the struggle in balancing work and family life. The payment of DLA and the extra entitlements through Child Tax Credit can be an essential boost to household incomes. Through our recent research we recognise that parents who have a child with a disability and/or special needs can also find it difficult to access registered childcare which can, in turn, restrict their opportunities to access and stay in work.
If you would like to read our recent research report ‘Childcare for All?’ which consulted families of children with disabilities and/or special needs, please call 0800 028 6538 to obtain a copy.

For information on the calculations this article is based on please contact
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