Tax Credit Warning. Are you getting the cash you're entitled to?

Former_MSE_Wendy

What this is all about (see below for the video)

Tax Credits are money paid by the government via the Inland Revenue to make it easier for people to stay in work rather than live on benefits. This is a quick note on whether you're entitled, how to renew and what to do if you've overpaid.


There are two types of tax credits.

• Child Tax Credit. Quite simply an additional benefit available to those with children who qualify.
  
• Working Tax Credit. This is for those working over 16 hours a week and are either disabled, on low incomes, over 16 with a child, paying for childcare, or over 50 and returning to work after a period of unemployment; or those over 25 working at least 30 hours a week.

The amount you get depends on your individual circumstances including how much you earn and it is paid weekly straight into your bank or building society account.

Should you be getting the credit?

Many don't realise they're eligible for Tax Credits, yet families earning up to around £66,000 may qualify for free cash. It's easy to quick benefit check up, using the HMRC calculator or go through a more detailed one, via the benefit check up guide. Also see the special Childcare tax credits guide.

Watch the Community Channel video

Already claiming? It’s time to renew.

If you’re already getting the credit you'll probably have just been sent your yearly renewal pack.

This needs to be checked and if there is anything wrong you must let the tax office know before the 31 July 09 to ensure your payments don’t stop. It’s a good idea to get all your paperwork together, such as your P60 and details of any childcare costs, to help with checking the form.

You can either complete the paper Annual Declaration or phone the Tax Credit Helpline on 0845 300 3900.

The renewal pack asks how much you earned last year (6 Apr 08 to 5 Apr 09) which is then used to check you received the correct payments last year and also to calculate the amount you’ll get next year.

It’s important this is as accurate as possible as you could actually be entitled to more credit. Also, if your payments need to go down it is better to do this asap, as any overpayments will need to be repaid at some point anyway.

If you’ve no changes then just sign the Annual Declaration and send it back, although remember you don’t have to wait until the yearly renewal to update your details. Best practice (to avoid messy overpayment issues) is to tell the tax office any changes as soon as they happen throughout the year.

If you didn't get an Annual Declaration (If you only get the family element of Child Tax Credit, or you claimed tax credits but didn't get them because your income is too high) your credits will be automatically renewed but if you are at all unsure about anything call the Tax Credit Helpline on 0845 300 3900 to check.


What counts as a change?

• You change your job, income or number of hours worked
• You’ve had a child (or you’ve fostered or adopted a child)
• You start paying for childcare or your childcare costs go up
• You’ve started to receive Childcare Vouchers

You should also let the tax office know if you move house, bank account or have a new phone number.

Important: There are some circumstances you should tell the tax office straight away, and not wait for your renewal. These are:

· If you move in with a partner, get married or leave the UK for longer than 8 weeks
· If your working hours drop below your 16 or 25 hour threshold
· If your childcare costs do down

What to do if you’ve overpaid

Tax Credits have rightlyful had some bad press in the last few years due to the high number of overpayments, although there have been some recent changes to make the process a little better.


Overpayments usually happen because:

• The office has made a mistake in your calculations
  
• You didn’t tell the tax office the correct details
• The office has taken longer than a month to update your records once you’ve informed them of any changes.

If you’re told you’ve been overpaid contact the Tax Credits Helpline to find out why.

If you have carried out your responsibilities, eg informed all changes on time (you have longer if you or a family member were seriously ill), and the tax office hasn’t carried out its responsibilities, you may be able to get the overpayments written off or at least payments spread for longer.

How to pay back overpayments

If you’re still getting credits your future payments will probably be reduced to cover the cash you’ve already had.

In most cases this is a maximum of 10% or 25 % of your weekly payment (but could be up to 100% if you are a high earner) until the money is repaid. Eg if you’re asked to pay 10% back and your new weekly credit is £50 you’ll pay £5 back per week.

If your payments have stopped, eg you earn too much or haven’t renewed in time, you’ll probably be asked to pay the full amount back in one go. This needs to be paid within 30 days but can be spread over up to 12 months in some circumstances.

Take action if it’s wrong

If you think the tax office has made a mistake in its calculations you can complain. To dispute your overpayment fill in form TC846 and it’ll be put on hold until your complaint has been investigsted.

So, if you told the office of a change and it didn’t update your records, especially if you have experienced further financial inconvenience because of the mistake, such as Bank Charges, write to complain.

Give all information you can on the form, including why you think you should not repay the overpayment and any evidence you may have to back up your claim. You must fill in the form within a month of being told about the overpayments so act quickly if you need to!

Further details on Tax Credit overpayments can be found on the Citizens Advice factsheet and if you need any help complaining your local Citizens Advice or other MoneySavers on the Benefits and Tax Credits board may be able to help.


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K.Maidment

Hello,

did you know it is very hard for the self employed to get the correct tax credits. We only have our books certified once per year so we only know once per year how much we have earnt. If the tax people have overpaid they can claim back for the whole year BUT if we have been underpaid we can only claim back for three months!
This year I made sure I overestimated my earnings as I would rather be underpaid than overpaid and have to struggle to pay back. I am sure that this is not in the spirit of why this system was set up. Why can't I claim back for the whole year?

K.Maidment

Sensemaya

K.Maidment wrote: »

Hello,

did you know it is very hard for the self employed to get the correct tax credits. We only have our books certified once per year so we only know once per year how much we have earnt. If the tax people have overpaid they can claim back for the whole year BUT if we have been underpaid we can only claim back for three months!
This year I made sure I overestimated my earnings as I would rather be underpaid than overpaid and have to struggle to pay back. I am sure that this is not in the spirit of why this system was set up. Why can't I claim back for the whole year?

K.Maidment

I would change your year end to March. Then have your books done asap. You can then inform them over the phone of net profit and pension contribution ( if any ). You are then up to date as self employed run a year behind.

PasturesNew

The self-employed's income can literally change overnight all over the place.

My income's dropped from £12k/year to £8k/year, but I wouldn't claim because by next month it might be up to £10k ... or who knows. And I have work for the next 4 weeks... so you'd never know what to put and you'd never be able to keep on top of how much you were earning at the moment.

When self-employed you just do what you can, cross your fingers and hope it'll be different tomorrow, next week ... maybe next month.

family32

Not sure if the above information of how to complete the tax credits review is correct. I have been through steps1 to 6 on my annual review and it concludes that I need to do nothing at all. There is no form to sign and return (there is absolutely nowhere in the documents for my signature!). Perhaps someone from Martins's moneysaving can confirm this?

jessiebessie

Hi,we were overpaid (apparently) the first year that tax credits came into force.We didn't know we were getting too much everything was right in the award notice?? we queried it the following year when it all came to light but they wouldn't admit that it was their fault.So for each year since this we have been awarded the minimum child tax credits but they have taken all of it back to pay the overpayments????
Is there anything we can do even though it's quite a long time ago?
Thanks

mandij30

What if it shows a shortfall between the last 2 years.
For example my 2007/2008 p60 states my earnings were £6109
Yet my 2008/2009 p60 states my earnings were £5568

Would I be entitled to claim that back the £541 difference ?
I looked at my new award and it doesn't mention anything on there with regards to this.

Any help is appreciated
Thanks in advance

Former_MSE_Wendy

family32 wrote: »

Not sure if the above information of how to complete the tax credits review is correct. I have been through steps1 to 6 on my annual review and it concludes that I need to do nothing at all. There is no form to sign and return (there is absolutely nowhere in the documents for my signature!). Perhaps someone from Martins's moneysaving can confirm this?

If you've only received an Annual Review (and nothing has changed in your personal situation, your income is still in the limits shown in the notice AND there are no mistakes or missing details in the notice) your credits sould be automatically renewed.

If you have recieved Annual Declaration you need to fill this in and send back.

If you are at all unsure on what to do please ring the Tax Credit Helpline on 0845 300 3900 though.

Fulham_Mark

Officially I'm a company director but since I haven't sold much over the last year I'm only paying myself the minimum wage and no profits/dividends.

In qualify for some working credits which is equivilant to 3 weeks pay so not to be sniffed at.

Are directors excluded?

thanks

tonycree

how does it work for the agency/temp. staff.
as far as i can see and i was told over the 'phone
by the helpline, if i don't average 30 hours per week,
then no entitlement...
being agency/temp. one never knows if and when, work will arrive; we may not average 30 hours per week; we're short of cash and struggling, whereas if the WTC was lowered we'd benefit (!) too - at a time when we really need some help...

DAVEY1979

family32 wrote: »

Not sure if the above information of how to complete the tax credits review is correct. I have been through steps1 to 6 on my annual review and it concludes that I need to do nothing at all. There is no form to sign and return (there is absolutely nowhere in the documents for my signature!). Perhaps someone from Martins's moneysaving can confirm this?

Not all renewals require a reply, this is called a auto renewal. On the pack that has been issued it will have 2 income brackets, for example £22,000 to £65,000. If your income falls between the two and you have no changes in your circumstances the tax credit system will automatically renew your claim after 31 july, check your renwal pack for your income brackets. I am a tax credit advisor on the helpline and this question pops up regular. hope this helps