WTC / Last Years earnings ??

50Twuncle

Why, when I check whether I am entitled to any WTC - do I get asked what my earnings were last Tax Year ?
Surely - it is THIS year that matters ?
Last year - I was made redundant and the lump sum received is now affecting WTC

mitchaa

It's just the way the system works. There has to be a verification of some sorts and that verifcation method is the P60. P60's are only issed once per year. If the system worked like you think it should then what's to stop people declaring very low incomes and receiving max tax credit awards with no control in place to verify said claims.

If you have a change in circumstances, i.e you have been made redundant, had a partner leave, stopped for maternity, had working hours reduced etc, then you can phone up and give an estimated income for the FY ahead. However in doing so, you lose your right to any disregard so if you underestimate your income you will receive overpayments and these will be recouped the year later in that years awards.

You would have received more money than you should have last year then through a lump sum? If you received additional money you have to factor this in for tax credits. You cannot get the best of both worlds.

mitchaa

Actually thinking about it, if the system worked the way you think it should then you would have been overpaid on last years award as if you received a lump sum over and above your normal income then you would have earned too much in that year and would have had to pay it back this year.

50Twuncle

So - if they are always working baseing their payments a year behind - what happens if someone manages to find a well paid job after a year in the doldrums - can they then claim WTC for their well paid year ?

50Twuncle

mitchaa wrote: »

Actually thinking about it, if the system worked the way you think it should then you would have been overpaid on last years award as if you received a lump sum over and above your normal income then you would have earned too much in that year and would have had to pay it back this year.

No - not if I had not claimed previously (as is my case) - I have never claimed WTC before !!

mitchaa

21Twinkle wrote: »

So - if they are always working baseing their payments a year behind - what happens if someone manages to find a well paid job after a year in the doldrums - can they then claim WTC for their well paid year ?

Actually they can, as long as it does not increase by more than £25k. (This is soon to be reduced down to £5k with the new government i believe)

mitchaa

21Twinkle wrote: »

No - not if I had not claimed previously (as is my case) - I have never claimed WTC before !!

I guess your 09/10 income was significantly higher than what your 10/11 income is likely to be?

50Twuncle

mitchaa wrote: »

Actually they can, as long as it does not increase by more than £25k. (This is soon to be reduced down to £5k with the new government i believe)

So they are baseing it on change of income - rather than actual amount of income ? - seems unfair to me .....

50Twuncle

mitchaa wrote: »

I guess your 09/10 income was significantly higher than what your 10/11 income is likely to be?

Considerably higher - yes !!

mitchaa

21Twinkle wrote: »

So they are baseing it on change of income - rather than actual amount of income ? - seems unfair to me .....

In that year yes, but come renewal time for the following year, the income would be higher and the tax credit award reduced.

In any case, if your income is much lower this year, it's probably best phoning them up and explaining. You may get an amended award for the year ahead. Worth a try.

If not, then you will have to wait until April 2011 before your awards will increase.

flashnazia

mitchaa wrote: »

Actually they can, as long as it does not increase by more than £25k. (This is soon to be reduced down to £5k with the new government i believe)

What am I hearing here? I'm sure this is all wrong!

Firstly, tax credits are based on previous year's earnings but if earnings increase in the current year the next year's tax credits will reduce.

The 25k disregard does not mean someone can earn up to 25k more free of deductions in tax credits! It's just the threshold under which you don't have to declare straight away; but next year's tax credits will take the increased earnings into account.

Correct me if I am wrong as I'm not a benefit expert but I'm 90% sure I'm not barking up the wrong tree!