wages error vs working tax credits

andipeeuk

Hi All,

Apologies if this has been covered elsewhere, but I had a quick search and couldn't find anything.... if anyone can advise I would be most grateful.

My partner received some great news from work the other day, stating they had not been correctly processing her yearly increments for the last 5 years, and as such they had rectified this and she would get a lump sum in the xmas pay packet which brought her up to date.

In calculating how much this would be, it seems like it is about £4500.00 the only issue being, because my partner has been recieving working tax credits during this period, will the tax man come wanting a hefty slice of this money, giving that whilst her wage has been low, the working tax credits have "topped up" her income.

We are (or rather ...she is) wondering if it is even safe to touch the money ...giving that if it all gets spent, and then the tax man comes a knocking, it will screw up all future working tax credits payments until they have had their pound of flesh!

Has anyone had such a thing before ?
How far back can the tax man backwardly ammend how much he gets/wants in backpay?

Any info whatsoever would be great, as my partner is on the verge of phoning the tax people, who I am almost certain will say.... "yes, give it all to us!"

Help !

nannytone_2

this money isnt a windfall. its wages that she was underpaid during that period.
if her earnings had been correct, and as a result she had been entitled to lower tax credit payments....
then why shouldnt it be paid back?

andipeeuk

Of course, I am completely in agreement with you... if it has to be payed back, then it has to be payed back.... but similarly you can see how it can be offensive to ones sensibilities.....

If I was in this situation, I would rather have never seen the money and just had it taken care of through work liaising with the tax man.

I cant think of anything worse than a completely hollow bonus, especially in the current economic climate and time of year.... "here.. have £4000....did you like that? good now give it straight back again."

I suppose the most pertinent question would be....
How far back can the tax man backwardly amend how much he gets/wants in backpay? is there any limit ??

similarly, it does make the working tax credit system great if you are going to be on minimum wage for the rest of your life... but if (much like my o/h) you do manage to make any headway up the greasy pole, all future pay rises you may have earned will all be consumed by the taxation system,,, so it works as an incentive to go and work for minimum wage forever.... but dont work too hard or get promoted as you will never see anything of the fruits of that labour despite this having come from your own extra effort /diligence/hard work/luck whatever you want to call it.!

But anyway,... going off topic here.....

Does anyone know any hard facts about this situation, or is this really as cut and dry as it seems on face value..... give it all to the tax man, because she hasn't earned it.

MrsManda

andipeeuk wrote: »

Does anyone know any hard facts about this situation, or is this really as cut and dry as it seems on face value..... give it all to the tax man, because she hasn't earned it.

She has earned it, it just wasn't paid to her when it should've been. She'll pay income tax and N.I. contributions on it before it gets to her.
Is it being put into her salary or paid as a bonus?

andipeeuk

I believe she has just had her paypacket for Jan and it was included within that. But there doesn't seem to be a break-down of what is what, she has just had a BIG Jan paypacket.

MrsManda

andipeeuk wrote: »

I believe she has just had her paypacket for Jan and it was included within that. But there doesn't seem to be a break-down of what is what, she has just had a BIG Jan paypacket.

did she not get a payslip?

andipeeuk

not as yet.... we/she tend to get payed a week or so early for Jan... so I guess the payslip will arrive through internal post in the new year... until then scared to touch it!

andipeeuk

Just had clarification... it is her salary it was bundled with, so I beleive it will have been taxed at this point at her normal level, so the tax man will know about this soon anyway???

If it all has to go to the tax man.... should she have been taxed on this also with her salary ???

Man... I'm confusing myself now !!
Must admit I know f-all about working tax credits and how they are applied, so completely in the dark here... All I know is the tax man does not give money away, and even if he does overpay you on working tax credits, you dont get any until he has his money back regardless of who's error it was.

elisebutt65

Ring up Tax Credits and let them know about the lump sum for Jan. They'll include it in her annual salary when working out payments for next year.

No point in saying that this bit was for 2008 and this for 2007 etc. As thus will just confuse things terribly, and with WTC, the simpler the better., especially if work haven't broken it down.

Basically, she'll pay tax and NI on it regardless, and then next years WTC will be based on this years figure so she will get less next year to allow for overpayments

Sixer

elisebutt65 wrote: »

Ring up Tax Credits and let them know about the lump sum for Jan. They'll include it in her annual salary when working out payments for next year.

No point in saying that this bit was for 2008 and this for 2007 etc. As thus will just confuse things terribly, and with WTC, the simpler the better., especially if work haven't broken it down.

Basically, she'll pay tax and NI on it regardless, and then next years WTC will be based on this years figure so she will get less next year to allow for overpayments

Surely that's very unfair on her though! She'll lose a lot of tax credits if she declares £4,500 extra income over one year, instead of what it should have been, which is much less over several years.

OP: I think you need to get proper advice on this.

MrsManda

Sixer wrote: »

Surely that's very unfair on her though! She'll lose a lot of tax credits if she declares £4,500 extra income over one year, instead of what it should have been, which is much less over several years.

But it does stop the OP's OH having to repay overpayments due to her change in income.
But I agree that she should contact the HMRC/Tax credits advisors and speak to them though it'll probably be easier to wait until she has her payslip