How much can I save before TAXMAN has his bit??

fellakel

HI all,

just on maternity leave expecting my second child (other one is 11). I have just had a windfall of £17k. How much can i have in ££ before benefits are affected. also advise on low risk investments would be useful please?

thanks in advance

Swipe

It all depends on which benefits you are claiming. For housing benefit I believe if you have more than £16,000 in savings you are no longer eligible. I'd withdraw £1000 from your account ASAP if this affects you.

http://www.covlaw.org.uk/welfare/leaflets/leaflet15.html

calleyw

Swipe wrote:

It all depends on which benefits you are claiming. For housing benefit I believe if you have more than £16,000 in savings you are no longer eligible. I'd withdraw £1000 from your account ASAP if this affects you.

http://www.covlaw.org.uk/welfare/leaflets/leaflet15.html

Would have thought that this would be better asked on the benefits board.

Not allow to deprive yourself of cash to claim benefits I was under the impression. And assuming it was a cheque it will have gone through the bank. So even if you have withdrawn it they will still know as they can look at bank accounts.


Yours


Calley

Milarky

But the good news is that if you don't claim Housing Benefit (HB) or Council Tax Benefit (CTB) the amount of capital ('savings') held no longer directly affects entitlement - there is no equivalent of the '£16,000' cut-off. Instead they just count what income you actually receive from this money and reduce entitlement much more gradually.

Eg With £17,000 in the bank at 4.5% that earns you £765pa before tax. On tax credits they will ignore the bottom £300 of this - leaving £465 to take into account. That then gets 'taxed' at 37 percent (barely a scratch in comparision with other benefits) which is about £170. (coincidentally, that's '1%' of your capital). You'd pay savings tax on the £765 too, at 20%, I would assume.

Another way to think about this is that you get to keep the capital in full but that any income you happen to earn from it is taxed at 57% (20% tax and 37% in reduced tax credit). That still means that you earn something from holding the savings (rather than disposing of them) because you are never technically out of pocket and don't 'drop out' of benefit altogether - as would happen with HB and CTB. (And if you don't hold about £6,000 in savings anyway you can 'benefit' from the £300 disregarded interest by working to earn the extra - because that would still be taken into account.)

(And if claiming WTC or CTC the advise must be: Get a mini cash ISA because any 'tax free' account is also ignored - making this form of savings especially 'valuable' when compared to normal taxable accounts: 4.3% in an ISA is therefore equivalent to '10%' from a taxable account. Save for your new child. The Child Trust Fund account from Nationwide pays up to 5.75% gross - but only to your new child's benefit, of course. But That's also a small 'saving' to you because it then becomes interest 'you' don't ever receive and so by-passes the effect on your tax credits: 5.75% from CTF account is equivalent to '13.3%' from a taxable account.)

HTH

flossy_splodge

Hey Milarky, when did the £16000 and you're dead rule cease to exist? I have a VERY low income but have savings in excess of this and thought I was excluded from all benefite until I've spent my hard won savings propping up my income and then when I'm destitute I maybe lucky enough to be able to claim threepence farthing!!?:mad:

Milarky

(In April 2003.)

Maybe you do now qualify, flossy_splodge. Have look at this for more of an idea how tax credits and other benefits overlap:

'Tax Credits Explained'

Will I be better off?
The new system has been designed to be more generous than Working Families Tax Credit, and you can get it even if you're earning £58,000 (or £66,000 if you have a baby under the age of one).
The way new tax credits are worked out is just like Working Families Tax Credit, but for the new credits; nine out of ten families will be eligible for some support…. Make sure you apply for yours! These case studies will help you to know how much money is available. The figures quoted are rounded down to the nearest £5.

More things to remember…
• If you are single with no children, aged over 25 and working over 30 hours a week on a low income, you may be able to apply for the Working Tax Credit.
• If you care for a child with a disability and receive Disability Living Allowance for that child, you can claim extra credits for them.
• If you are claiming already for Income Support, JobSeeekers Allowance or Working Families Tax Credit you will get a form in the post. Make sure you fill it in!
• Awards will be made over 12 months, and based on what your income was from the previous year.
• Claiming new tax credits will affect your eligibility for things like Housing Benefit and Council Tax Benefit. These will be reduced or you may lose them all together if you are working. If you are not working and claiming Income Support or Job Seekers Allowance you will keep them.
• You can have savings and still be eligible
• You can be self-employed and still get the tax credits