Child tax credits and reduction due to income calc.

patchwork_cat

Child tax credits are far from transparant or understood as I don't need to tell you ! I am scratching my head over this one. We 'phoned through our annual review and received a provisional assesment - however 3 days later we received an ammended assesment. It seems that someone has input our P60 figure in for this year and failed to do it for last year.

Anyway sorted that one out after much head scratching as how could our reduction due to income be different when income appeared to be the same.

Now on our award for this year our reduction due to income has gone down by over £1k, even at the same income. I have rung the office three times and can get no one who knows how the calculation is worked out in fact in my last call I was 'told off' for ringing the geographical number and not 0845! I felt like I was infront of the head!

Now my understanding is that on child tax credit not involving childcare that a taper begins at £16 040 with 39p in every £ being taken off award.

On my notice it has the correct income, but when I take £16 040 off and then 39% my award notice shows a deduction of £2000 less than I calculate! The tax office couldn't get their head around the fact that I would ring about being paid too much! I don't want a massive overpayment and have them clawing it back next year. They just keep saying the computer does it and you can't speak to anyone who actually can do the calculation manually to confirm it is correct!

flea72

the taper starts from £6420

Flea

patchwork_cat

I believe £6424 only if you received working tax and childcare. we aren't entitled to working tax credit. http://www.macintyrehudson.co.uk/content/padvisor_home/ctc_wtc.html

flea72

how to work out

annual income less threshold = excess income

tax credit entitlement less 39% of excess income = award amount

(tax credit entitlement is based on £2235 per child, CTC basic element of £545, WTC basic £1890, couple element £1890 and 30 hour element of £775) - work out which parts you are entitled to to give your your 'tax credit entitlement' for sums above

hth Flea

patchwork_cat

Thanks for your help flea, that is exactly what I have been doing and I can't get it to equal what they get. In fact on one of my notices they have a difference in income of £800, but that only makes a £125 difference to CTC on the award notice ! at 39% it ought to be £312 difference!!

Am going to put in actual figures, so you see what I mean. Salary £29070, 2 adults, 2 children ( complicated by the fact that my son is 16!) Total credit maximum £2235 x2 + £545. Taper at £16040, £13030 @ 39% is £5087, they have £3075! deduction due to income.

Also really annoyed at the phone line, why should I pay to ring them? Don't we receive tax credits because we are low income?

flea72

im assuming you live you a partner?

if so, i make it this

child element x 2 = £4700
basic CTC element = £545
WTC basic = £1890
couple = £1890
30 hour element = £775
Total entitlement = £9800

total income (£29070) minus threshold (£6420) = £22650

39% of £22650 = £8833.50

Total entitlement (£9800) less excess income (£8833.50) = Award of £966.50

i think tax credits are paid 4 weekly, so that should amount to £74.35 a month

Also as long as your son stays in f/t education, then your tax credits should continue. However, you have to inform them of this once they break up from school, as come september, they automatically remove the child off the system, as they assume they have left education

Flea

littleoldme_2

the elements that you would get for

child tax

child x2 = 4474.90
basic family = 547.50
total = 5424.35

working tax

basic = 1890.70
second adult = 1861.50
30 hours = 777.45
total 4529.65

the point for child tax is 16040.00
and for working is 6420.00

hope this helps

littleoldme_2

found this on the direct gov website
How your tax credits are reduced

If your income is higher than the income limit, your tax credits award is reduced.
Your award may be made up of several entitlements. Each entitlement is reduced in a set order as follows:

1. Working Tax Credit apart from the childcare element at the rate of 39 per cent
2. Working Tax Credit childcare element at the rate of 39 per cent
3. Child Tax Credit child element at the rate of 39 per cent
4. Child Tax Credit family element at the rate of 6.67 per cent

The Tax Credit Office works out a reduced amount by taking away the income limit for the particular element from your income. The result is multiplied by the rate that applies to that element - 39 per cent or 6.67 per cent - to give the reduced amount.
If the reduced amount is equal to or higher than the amount of the tax credits element - or payment - you qualify for, you won't get any tax credits for that element.
But if your entitlement is higher than the reduced amount, the amount you'll get is the difference between the entitlement and the reduced amount.

What are the income limits?

You only qualify for Child Tax Credit
If you only qualify for Child Tax Credit the income limit is £16,040. If your income is more than this, the child element will be reduced. But your income can be up to £50,000 before the family element is reduced.
You only qualify for Working Tax Credit
If you only qualify for Working Tax Credit the income limit is £6,420. If your income is more than this, the amount you get will be reduced.
You qualify for both Child Tax Credit and Working Tax Credit
If you qualify for both tax credits, the income limit for Working Tax Credit stays at £6,420.
But the Child Tax Credit income limit becomes the higher of:

• the £16,040 limit
• the amount used to reduce the Working Tax Credit elements to nil - this is explained in the guide on how to work out your tax credits entitlement for short periods

However your income can be up to £50,000 before the family element of Child Tax Credit is reduced.




now if thats not confusing i dont know what is

for what its worth my award doesnt tally up either

patchwork_cat

I have read throught the legislation, too. Very confusing, but I am ex Housing Benefit, so not too bad. I am convinced that there is something wrong.

I am becoming convinced there is a blip. Can any one who gets just child tax credit and has had their new award look and see if it substantially different to last year even without a decrease in income?

I calculate my 39% over £16 040 as £5081 and tax office calculate it at £3075, reduction due to your income . I have phoned them, but getting no where.

JMerch

I used to work on TC, so know how the calculations are made. Even though you are only receiving CTC, you are still eligible to WTC (only the level of HH income stops you getting it), therefore it would be the £6420 income threshold used, not the £16040. That is probably what is causing your discrepancies.

Also, you need to calculate WTC and CTC seperately, not just lump them together.

So WTC max ent (before income deductions)= £4525
CTC max ent= £5015

Taper= £29070 - 6420 = 22650

then multiply by 39%= £8838.5

This comes off WTC first of all, leaving you with £4313 to be deducted from CTC.

So final annual award £702 over a full tax year without any change of circumstances.

If your son has turned 16 since 31/8/8 then he will not be included on your current award notice (or calculations) after 31/8/9

Jols01

Hi, I have had exactly the same problem.

Got our final reward for 2008/09 after calling in my annual review - and can't work out how they have done the reduction in income. Same for the 2009/10 reward. To me it looks like we are being overpaid. Like you I have phoned 4 times!! Got told in the end it was the computer that did the calculations.

Thanks to the posts I have managed to get the difference down to £102 for this year (using WTC ent etc) but next year is different. They seem to be using last year's income - which is strange because I was on maternity leave this year - so got a lot less money. Even though I've given a fair estimate for this year - which is £7K higher....

I'm just a bit worried that they will ask for the money back ...which is why I keep trying to sort it out with them, but getting no where!!