I have a client, recently widowed, with her husband's estate nearly finalised. Due to her own personal and children's circumstances at present she is entitled to and now receives £113 per week child tax credit. When husband's estate is wound up she expects to receive around £20,000 - how will this be treated when she is assessed for award of her child tax credits. Information a bit iffy.........can locate that first £300 of "income" from "capital" not counted but unsure whether the actual income generated from this capital will actually be included in calculation for child tax credits (no working tax credit being paid). Also, if is included how do we calculate how much "income" is expected to be generated from the capital.
Grateful for some help and advice with this one.

If she put the £20,000 into a building society account she could probably get around 5% interest which would be £1,000 for the year. The first £300 of this would be ignored so £700 would be treated for income purposes. However, if this were her only income it would be below the threshold for child tax credit so she would get the full rate of child tax credit.

But what happens when that capital is only received mid-year, you won't be eligilble for a full years interest come reconciliation at the end of that tax year. I suppose it would be in keeping with the assessment of tax credits that they assume a pro rata amount over a relevant period

I expect it would provide an income well under £2,500 for the year anyway, so for the first year it will probably have no effect unless there has been another kind of income increase.

Don't know about English law, but in Scotland part of the capital would be the children's by legal rights. Depending how this is invested, income may be non taxable.
If there is any private pension any part for dependants may also be non taxable.
Client will have to claim with actual own income for last year then provide estimate of taxable income for the current year, and then submit actual income after the end of the tax year.
This happened to me and because my peronal income increased from last year to current year, in spite of info going in timeously, I was still overpaid, and took a while to sort out.