Working tax credit error

boinkit_2

I currently receive Working Tax Credits each month, and have done for the past couple of years.

I have been contacted by HMRC as they want details of my earnings and my employer as they have no record of this information.

This seems to all stem back to that fact that I foolishly, and completely innocently, stated on my Working Tax Credit form that I was self-employed whereas as my wife pays me from our business I now realise that I am actually an employee.

A genuine and daft mistake, but does anyone know what effect this error will have on my tax credits?

sinstar

As long as they had the correct household income & work hours details this shouldn't make any difference to your award, they just like to make sure employer/self employment details are up to date & correct as differences between their records and other tax records may be flagged up (it sounds like this is what has happened).

Did they have you down as self employed with no income, but the income you have is included in the income they have in the system for your partner (as she pays you from the business)? As long as the total household income is accurate you should be fine.

The type of employment you are in makes no difference to your tax credits

boinkit_2

All the figures are correct, and the only mistake was that I said my income was from self-employment and not from being an employee.

Hopefully then I will be able to correct the mistake without being penalised!

System

The reason they are enquiring is because they would expect someone self-employed to have a UTR (Unique Taxpayer Reference) and to submit a tax return each year. If they can't trace either of these when they check your claim then they will ask you to explain. However if you declared all your PAYE income each year and you worked the number of hours declared on your application then they should be happy.

They will expect your PAYE income as an employee to equate to you receiving more than the minimum wage.

boinkit_2

I receive payment from my wife, out of the profits of the business. She pays me ~ £5,000 per year, which is below the level that I will be taxed on.

I work more than 16 hours per week, often more than 30.

There is no pay roll though, as we were advised by an accountant that she can just pay me this amount without there being a problem.

My concern though is that I don't know how I appear in the eyes of the tax man. While I am working and being paid (a very small amount) as there is no pay roll, then am I an employee, self-employed, or unemployed (but somehow working all the same!)

I am losing sleep over this, hence I am posting this now.

Please can someone let me know what they think?

clairec79

She's paying you less than minimum wage though - which may cause problems

cte1111

I think you / your wife need to clarify with your accountant on what basis you are being paid. If it is as a wage, then you need pay slips etc. If it is as a dividend, then it will not count as wages for tax credits, AFAIK.

compoff

To be honest, it won't make a big difference as long as your income is correctly declared. Regardless of whether it is a wage or a dividend it still has to be declared anyway. So, I wouldn't lose sleep over it, they just like to keep things correct, but it's not a major issue.