Tax Credits - Some help

sgx.saint

Hi All,

Looking for some help with the £25K disregard.

In the current financial year, myself and my partners joint income is approx £18750 per year.

This is a mixture of my full time wage, and my partners income from employment, less the SMP disregard, as she is currently on maternity leave.

We currently receive Working and Child Tax Credits.

Come October, when my partner is due to return to work, she will be receiving for the first six months, her full time wage, even though she will be working part-time hours.

My income for the year is £16000, and this will not change until April next year.

My partners declarable income is currently £2750, which is mainly pay through employment, as the majority of the SMP is disregarded.

As I say above, come October, my partners salary will increase up to £14305, but this is obviously pro-rata for the remainder of the year.

So when I declare the increase in income to Tax Credits, do I work out how much she has received until October 2010, then declare the pro-rata amount she will receive until April 2011, or do I declare the whole salary amount?

Hope that makes sense.

Once I get some help, I can then ask my questions regarding a drop in working hours and the £25K disregard.

Appreciate any help!!

sgx.saint

Does the above make sense, I hope?

Elaine_Wilson

They will want to know how much she will earn in the full tax year.

If I read your question correctly this will be a small figure for the first six months to September (because of SMP) and about £7,000 for the period October 2010 to March 2011.

Is that any help?

sgx.saint

Elaine_Wilson wrote: »

They will want to know how much she will earn in the full tax year.

If I read your question correctly this will be a small figure for the first six months to September (because of SMP) and about £7,000 for the period October 2010 to March 2011.

Is that any help?

Hi Elaine,

Thanks for the reply.

Yes, that helps, so I basically calculate how much she has earned up until October, then work out her monthly wage for the remainder of the tax year and then add this total to the previous amount which will give me what her total earnings will be for the full tax year.

Next question, is, what, if anything will happen, if my partner returns to work on reduced hours of 16 hours a week?

Secondly based on the above workings, how do I work out whether the increase in income in October will be above or below the £25K disregard.

Thanks

sgx.saint

Anyone?

sgx.saint

Bump.

Sorry, could really do with some help with this one!

Elaine_Wilson

Sorry, I'm not clear on the actual question here.

You are full time so the working hours qualification is met anyhow. The only difference will be the additional income coming in to the household.

The £25K disregard will be related to the total income of your household for the year. This will be the total earnings of both of you (as per the P60s) plus other income such as benefits and investment income, less the designated disregards such as the first £300 of other income. This total figure will then be compared to the equivalent figure for the previous year.

sgx.saint

Elaine_Wilson wrote: »

Sorry, I'm not clear on the actual question here.

You are full time so the working hours qualification is met anyhow. The only difference will be the additional income coming in to the household.

The £25K disregard will be related to the total income of your household for the year. This will be the total earnings of both of you (as per the P60s) plus other income such as benefits and investment income, less the designated disregards such as the first £300 of other income. This total figure will then be compared to the equivalent figure for the previous year.

Hi Elaine,

I think I have misunderstood the £25K disregard, and am now panicking about how myself and my partner are going to survive!

Our declared estimated income for the current tax year is £17266.00, which is £16000 from my full time wage (37 hours) and £1266 from my partner who is on maternity leave but for TC purposes is declared as working 37 hours a week.

She actually receives more than £1266 in income at present, however this is the figure we calculated after applying the £100 SMP disregard to her income.

However, as of October, my partner will return to work, she will be working 16 hours a week, and will earn a part time wage of approx £540 gross, and will also receive an additional £652.50 gross from the company every month for six months as a welcome back to work package.

So, therefore, the estimated income of £17266.00 initially given to tax credits, will be incorrect, and if I have done my maths correctly, she will have earned within the current tax year - £9744. An increase of £8478.00.

According to the tax credits calculator on the entitled.to website, we will only be entitled to £21 per week in child tax credit. We are currently receiving £300 per month approx combined WTC and CTC.

I'm guessing we're pretty much scuppered, and we only just found out that she would be entitled to the extra pay from work, otherwise I would have overestimated the income.

*sigh*

sgx.saint

Right, ok, just read the MSE Tax Credits guide, and it states I should inform tax credits of any changes in our circumstances so they can recalculate our circumstances.

As it currently stands my partners income, through SMP and additional support through work, does equate to the initial figure of £1266 which we declared to tax credits in April, and have been awarded WTC and CTC accordingly.

Come October, when we find out her exact salary details, I planned on contacting Tax Credits to provide them with the revised income for the remainder of the year.

Firstly, is this the correct thing to do, and secondly, I read that if we have indeed been overpaid, then tax credits will most likely just reduced our existing payments by no more than 25%, is that right?

Also, would we not be entitled pro-rata to the current level of tax credits, until such a time, my partners income increased? ... So at that stage, our tax credits would reduced?

karenx

Come next tax year you will only get the £21 per week as your income is too high for working tax credits.

sgx.saint

Hi Karen,

That's what I thought, but what will happen in the current tax year?