Tax Credits Annual Review - Confused help please

Vulcans_2

I have received my family's tax credit Annual Review for 05/04/2009. Within it tells us what we will be paid in 2009/2010 in the payments section.

I am about to be made redundant in Sep 02 2009 and I will be getting a redundancy package of greater than £75,000 (before tax) as I have 25 years service with my current company.

My question is two fold, a) should I contact HMRC now and tell them about this pending event and b) will I in all likelihood get the tax credit's for 2009/2010 ? as the first £30,000 is supposedly tax-free is this deducted for the total joint income figure.

P.S my wife only works 16 hrs a week part-time so bringing in £3.5-£4.0 thousand a year.

immoral_angeluk

Savings do not affect tax credit entitlement. However if you are recieving any mean tested benefits such as housing benefit etc then anything of 16k in savings will automatically disqualify you from them.
Is this money coming in a lump sum or as a regular income?
If it is a regular income then you will have to inform them and it will almost certainly affect your entitlement in some way. If it is a lump sum it won't affect tax credits.

Vulcans_2

Thanks for the quick reply.

To answer your questions, the Redundancy payment I will receive will be in Sept 2009 as a lump payment I presume but am unsure how this will be deemed to be savings ?

Is this redundancy payment not treat as regular income for 2009 ?

I received no other payments currently for housing benefit as I am still working until Sept 2 2009.

nogginthenog

immoral_angeluk wrote: »

Savings do not affect tax credit entitlement. However if you are recieving any mean tested benefits such as housing benefit etc then anything of 16k in savings will automatically disqualify you from them.
Is this money coming in a lump sum or as a regular income?
If it is a regular income then you will have to inform them and it will almost certainly affect your entitlement in some way. If it is a lump sum it won't affect tax credits.

Income from savings does count against TAX CREDITS...ANYTHING OVER £300 pa you have to declare, ISA'S AND PEPS DO NOT COUNT...i am not to sure about premium bonds.

TotallyBroke

You do not have to declare your savings as other income. You only have to declare any interest earned if over £300.

So with the OP's £70,000 he could put it under the mattress and not earn any money on it so do not declare.
If he puts it in a bank or elsewhere and earns £299 in interest he does not have to declare. Do the same and earn £301 in interest and you would declare the £1.

DCodd

As for telling them about "this pending event" their response will be that they can not take any action until it happens, so telling them now will not help, just tell them the day it happens.

sinstar

A redundancy package is NOT treated as savings/other income for tax credits purposes. I am trying to find specific information on their site regarding this and will reply again once I have done so, but any advice given treating this money as savings is most likely incorrect.

sinstar

What else to include

As well as your total pay, you need to add:

• tips
• money you got because your job ended or changed, and which was taxed
• strike pay from your trade union
• money you made from stocks and shares that you got from your employment
• payments for any work you did whilst serving a sentence in prison or on remand.

http://www.hmrc.gov.uk/taxcredits/start/claiming/income-hours/employment-income.htm

Taxable Earnings Adjustments For Tax Credits (Info)

The adjustments required to taxable earnings to determine income from earnings for tax credit purposes are...

• Addition (for the year 2003 / 4 year onwards) for the taxable amount of any payments or benefits received on termination of employment and after the claimant received their form P45 (if they are using the P60 / P45 figure)

This includes

• Damages for breach of employment contract

• Agreement for benefits provided during employment to continue beyond the termination

• Redundancy pay; and

• Compensation payments for wrongful and unfair dismissal

The amount to include as income is the amount in excess of £30,000.

http://www.hmrc.gov.uk/manuals/ntcmanual/eligibility_estincome/ntc0310040.htm

sinstar

If you declare £45000 of this redundancy payment as 2009-2010 income, it is unlikely to affect your award until the 2010-2011 tax year. If your 2008-2009 income is lower than your 2009-2010-including-redundancy-package-income, your award for 2009-2010 will be based on your actual 2008-2009 income.

Then in the 2010-2011 tax year your award will be based on your 2009-2010 income (which I assume will be at least £45000). This will mean no working tax credit entitlement but you would still be entitled to child tax credit, and the amount of this would depend on the number of children you have etc.