One off windfall and tax credits

ukjoel

We currently receive tax credits which I beleive are both working tax credits and child tax credits. None of these are (savings or assets) means tested and are based on income and number of kids/nursery costs etc.

I am about to sell a second home and will receive a one off payment of about £200k.

I wandered how this would be treated by tax credit people for this tax year and next taxt year.

Will they
a - stop any future payments for this tax year but let me keep whats been received to date.
b - stop any future payments and request back any payments received to date.


If I then reapply for tax credits in april based on next tax years estimated income will I return back to the same level of tax credits I have previously received.

Money received from property sale will be spent paying off mortgage on first home so as of April 1st our savings will be of a similar level as prior to house sale (just with 200k less mortgage debt).

Appreciate the child benefits are ring fenced (as of the moment) but its more the working and child tax credits I am curious about.

Thanks

Indie_Kid

Tax credits ar based on the taxable interest of savings. If you have over £300 per year in taxable interest from savings, you won't qualify - regardless of your income from wages.

alwaysonthego_2

sh1305 wrote: »

Tax credits ar based on the taxable interest of savings. If you have over £300 per year in taxable interest from savings, you won't qualify - regardless of your income from wages.

Don't you mean they have to declare it as other income, rather then they won't qualify

Indie_Kid

alwaysonthego wrote: »

Don't you mean they have to declare it as other income, rather then they won't qualify

Yes I did:o

ukjoel

Thanks for the replies but am even more confused now.

From what I gather your saying that if the income from property sale is then used to pay off mortgage (meaning no interest generated) then I would not need to inform them next tax year of any earnings from interest (as there would be none).

What about with regards to this tax year - I presume I still need to tell them about the income (even though it was being spent to repay debt straight away)?

Thanks

alwaysonthego_2

You only need tell them about any interest over £300 generated.

silvercar

The money you get from the sale of a property is a capital gain rather than income, in tax terms. You may be liable to capital gains tax depending on a variety of factors. As far as income for CTC, WTC etc, I would have though you would already have declared any income you get from this property eg rent.

ukjoel

Thanks again - but really want to be 100% sure on this as it sounds too good to be true.

I can sell my second home for 200k.
Due to various allowances (ie fact I lived in it for 4 years) means that 7 of the 10 years of ownership dont qualify for cgt and the remainder it was rented so again taxed on income so CGT is within my annual allowance.

So even though I am selling this asset because there is no CGT to pay I dont need to tell the tax credit office about it.

It just seems wrong (not that I am complaining) that I can still be getting paid a grand a month tax credits and child benefit and yet still be getting this one off payment without it having any impact on my tax credits.

Apologies for keep bouncing this back to you but it sounds almost too good to be true.

ukjoel

re previous post - I have declared rent in the past and submit a self assessment every year but property in question has been empty now for 15 months so no rental income this tax year.

alwaysonthego_2

Tax credits do not look at capital, but income instead.

Ashley86_2

you only need to tell tax creidts if you make any interest fro your bank savings account if you sell and use the money for anything else then they dont need to know only interest