Tax credits-Have i got this right?

richpoortyke

Ive never truly understood Tax credits and im still paying back an overpayment from many years ago.
I just want to know if ive got this right.

I worked for around 9 months of the last financial year full time and my partner worked all the year part time.
Our income came to around £17000 for 09-10

So from April this year whatever happens will i still receive the tax credits based on the last years income?

Im asking as im currently only contracted to the end of the year so im not sure if i will be unemployed again after Christmas. I also dont want to be overpaid.
My income could be higher than £17000 if i stay in employment but it could be lower if i lose my job.
So im assuming i have to inform the Tax Credits people if this occurs but would this have any effect before April 2011?

Thanks for any help

Witter

Yes as far as i know they go on last years earnings but you have to give them an estimate for april 10 to april 11. Maybe they will adjust it so your not overpaid

toonbaz

your tax credits for this year will be based on 09-10 income, if this years income is higher it would only affect the award if the increase was more than 25k which i assume is highly unlikely so no real reason to worry about overpayment, if this years income is lower then they will base your award on the lower amount.

richpoortyke

So what is the point in having to give estimates if it is going to have no bearing on the current year?
Obviously if the difference is massivei can understand but when it is only a couple of thousand difference i cant see why they want to know.
Ive actually put my estimate down as the amount i earned last year.
How can we actually know anyway?

starM

toonbaz wrote: »

your tax credits for this year will be based on 09-10 income, if this years income is higher it would only affect the award if the increase was more than 25k which i assume is highly unlikely so no real reason to worry about overpayment, if this years income is lower then they will base your award on the lower amount.

Can you explain this abit more please? My income for 09-10 was £17364. For 2010-2011 year my income will be £17364 + £2000 other income. Will I ask them to base my award against the current income? or will it make no diffirence in Apr 11 as total income is less than 25K so no o/p will occur?

richpoortyke, sorry to insert my post in your thread but Tax Credit is complicated to understand and I dont want to get overpaid when they finalise the award next yr.

MS

DreamerV

Tax credits need your income for the year of the award (estimate as the year has not finished yet) and for the year before (hopefully actual as most people will have that figure already). They need this because they based your award on the lower of the 2 figures, and they are happy to do this to help people out in "real time" when their income unexpectedly goes down in the year of their award. E.g. if their income was less last yr, they still get a higher award, and if their income is lower this yr instead, they get the higher award too. There is an exception, when someone earns over 25000 in excess of last year as they can't blindly ignore a massive increase in income forever. So if you earn 17000 last yr, and 47000 this year....then they will use last years of 17000 and add on the excess this yr after 25000 is disregarded i.e. in this case 22000.

If your circumstances change however, and you don't meet ths qualifying criteria e.g. working 30 hours per week at least if you have no children or no disabilities, then your award would stop if you're not elligible, even if your income is low enough. You'd be surprised the number of people who phone up asking for working or child tax credits who don't work or have children (which does of course bump up the queues for everyone else).

Bear in mind about the income thing explained above, that if you then underestimate this year's income to less than last year's, you would most likely be overpaid....or if you underestimate it to 17000 + up to 25000, when it'll be 17000 + more than 25000, then you would also most likely be overpaid. I personally therefore leave mine the same as last year, and then confirm it at the end of the yr, collecting any underpayment then (I would never earn over 25000 more than the year before).

richpoortyke

Sorry if im being a bit thick here buthow can you be overpaid/underpaid?
If you say you earned £10000 last year (09-10) the TC's paid this year (10-11) will be based on this amount.
So even if you earn £12000 this year (10-11) how can that cause an overpayment?
Surely instead the following year (11-12) will be based on the £12000 earned this year (10-11)?

Or am i missing something

toonbaz

richpoortyke wrote: »

Sorry if im being a bit thick here buthow can you be overpaid/underpaid?
If you say you earned £10000 last year (09-10) the TC's paid this year (10-11) will be based on this amount.
So even if you earn £12000 this year (10-11) how can that cause an overpayment?
Surely instead the following year (11-12) will be based on the £12000 earned this year (10-11)?

Or am i missing something

in that situation the 12k income for this yr would not cause an overpayment as the award would be based on last yrs income.
if you estimate 12k for this yr it means when april comes round they can immediately pay you based on that estimate on the new yr. if you didnt provide the estimate then next yr you would get payments based again on 10k until you completed your renewal so you could be recieving payments which are too high at the start of the yr.

richpoortyke

Right i see so really its just the first few weeks of the new financial year that can be a problem then. I take it this is because it can take a couple of months to get the renewal sorted out. Within that time you would continue to be paid the amount each week that you were receiving before and this may be too much/little until they reassess it all.

starM

starM wrote: »

Can you explain this abit more please? My income for 09-10 was £17364. For 2010-2011 year my income will be £17364 + £2000 other income. Will I ask them to base my award against the current income? or will it make no diffirence in Apr 11 as total income is less than 25K so no o/p will occur?

richpoortyke, sorry to insert my post in your thread but Tax Credit is complicated to understand and I dont want to get overpaid when they finalise the award next yr.

MS

So on My Tax Credit Renewal I can provide them income of £17364 for 09-10? For 2010-11 I can provide them my income from employment + other income when I get renewal form in Apr 2011.

toonbaz

starM wrote: »

So on My Tax Credit Renewal I can provide them income of £17364 for 09-10? For 2010-11 I can provide them my income from employment + other income when I get renewal form in Apr 2011.

thats correct, your additional £2000 other income wouldnt have an affect on your award until next april, you can provide that additional income when you do next years renewal or you could provide that information as an estimate anytime this current yr so that it will be taken into account from the start of the new tax year.