under estimated income should i tell tax credits now

kurjam

i am just sorting out all my paperwork before i start work in a weeks time (just finishing maternity leave)
when i did my renewal earlier this year i based my income for this year on my old job, but i am not returning to that job i have took a new job with less hours / pay !!
so i have over estimated this years income for me by £2000 should i tell them and will it make a difference now ??
if it will alter my payments for this year then i might do this, as going from weekly maternity allowance to monthly pay so things will be tight

i have to ring them about my change of employment, son going to college etc..... so thought i should tell them now !!

thanks for any help

TotallyBroke

I personally would leave it for the reasons I am going to mention.

You will be paid an amount based on the wage you have given, next year when you renew your amount will increase because you earned less.
This increase will almost counterbalance the loss you will receive when your child turns 1.

Also if you make a change now and then for some unexpected reason need to make another change later on in the year you will lose the £25k disregard. This is where you can earn £25k extra in the year without having to pay anything back. By losing this regard if you got a substantial payrise or overtime you will have to pay money back.
I always estimate mine over by approx £1,000. This is to cover any possible overtime I may have to do or to factor in a possibility of a pay rise in January.
I've only been claiming CTC since Jan 2007 but have never had to pay them back anything.

Hope That Helps

kurjam

but if i told them now, would my payments increase now straight away !!!

TotallyBroke

Yes I think they would but an underestimate of £2,000 is not going to increase them by much. You would be looking a small pounds.
But when your child is 1 you lose the baby element. So next year, if you waited, you would get the increase because your wage is lower, the extra that they didn't pay you this year. This would hopefully balance out the loss of the baby element.

If you take the increase of £20 every 4 weeks now this year and get used to living on this extra and the baby element. You may struggle when you lose the baby element of £50 every 4weeks. (These figures I have given are purely guess figures, I'm just trying to highlight the problem you may face next year.)
Plus say you take the £20 now and then at Christmas they increase your pay by £2,000 you will lose the £25k disregard so you will have to pay back anything they have paid you extra on the lower wage.
So you estimate your wages at A and they pay you B. You tell them about new lower wages C they start paying you a higher amount D. You then tell them your wages are actually A they will work out what B payments would've been for the year, minus the D payments they have given you and if they still owe you any money they will pay you an new lower amount of E or if they have overpaid you they will stop your payment and then next year reduce your amount to cover the overpayment.
I hope this makes sense. If not I'm sure someone who has more understanding and a better analogy will be along soon.

Shelley84

I would tell them any changes straight away - I got hit today with a £1700 overpayment notice and have to pay it back within 12 months! And I have no job!

I would tell them now, just in case they decide they have overpaid you. They really are a nightmare when it comes to this!

alwaysonthego_2

I agree with Totallybroke, if you estimate your income for this year and underestimate you will be overpaid because you lose your £25000 disregard.

kurjam

there is not going to be overtime in this job, i am paid for 16 hours and that is it, no increase in wages or less minimum wage goes up.... so i know quite well what i will get...

TotallyBroke

But today is the 28th of August, can you honestly predict what is going to happen in your life before April 2010. Anything could happen you could take a new job by then. Or luck could be bad as well especially in this climate.

For the extra £20 you may get until April is not worth the hassle you will find yourself in next year when you lose the baby element and if you lose the £25k disregard.

Shelley84 you must have not told them of a couple of small changes to your claim or possibly made the mistake kurjam is contemplating.
If you overestimate your wages for the year and then earn less, TC will owe you money and it will be added as an underpayment the following year.
If you tell them what you will earn and then earn more, so long as you are not earning more than £25,000 more you will not owe them anything.

lindsaygalaxy

Sorry to jump on this thread, but my question is along the similar lines.

I have estimated my income, but chances are when I returnn from maternity leave - probably in January - my income will be more than my estimate. I will also then have added childcare costs. I will have to report on the increase in childcare costs - but the income will not be an increase by over £25000. Do I tell them just about the childcare or the income too, and will telling them about just the chilcare cancel the right to the disregard?

lauzellen

If tax credits are using this tax years income to make the award (i.e. estimating what it shall be) you MUST over estimate as you will not get the 25K disregard. This disregard is only for when the award is based on the previous tax year.

To clarify - if you have estimated your income for this tax year (09/10) and your income is going to be higher than estimated you must tell tax credits immediately or you will accumulate an over-payment!

bestpud

OP - it is up to you of course, but, as you have asked, I would leave it as it is.

You don't know what may happen in the next 8 months and you will receive any underpayment in a lump sum, so why risk an overpayment?

You have already misjudged your income once, so who's to say the same won't happen again?

lindsaygalaxy - if your award is based on a lower income than you actually earned last year, you should inform them asap, because you are very likely to be accruing an overpayment.

Don't wait until January - estimate your actual income now (taking into account maternity pay and your wage when you return) and let them know if it will be higher than your estimate. That way they can adjust your award now and you won't end up losing money to cover the overpayment when you return to work in January.