WTC quick query

moneymabel

i am currently self employed but my business has made a loss this year (apr 2010-apr2011) so I will be eligible for WTC in the year 2011-2012.

Question is if I go into profit next year (2011-2012) would I have to pay back the WTC I recieved during 2011-2012 or would it just mean that i wouldnt be entitled to any WTC in 2012-2013? is this where the 25k allowance comes into play? its all very confusing-thanks for any help :-)

zagfles

The "25k" you refer to is being cut to £10k next year - what it means is that initially your award for next year will be based on this year's earnings, and the first 10k increase in your earnings next year are disregarded. If your earnings increase by more than 10k then you may have to pay some back.

BUT you get max WTC if your income is under £6420, so if your income this year is zero then if you earn say £16k next year you'll still get full WTC as you'll be assessed on 16k-10k = 6k. But if you earn 20k you'll be assessed on 20k-10k = 10k so will have to pay some back.

Are you claiming WTC now because you should be able to get some for this year (assuming you were putting the required hours in).

moneymabel

Thankyou for your reply-i'm not entitled to any this year as my other half works and i was working part time as well in the previous year which put me over the limit to claim...I did claim as i was told its better to start a claim early even if you know you wont get anything that year as it will make things easier next year when i can claim as i will just have to give them new figures instead of starting from scratch.

zagfles

moneymabel wrote: »

Thankyou for your reply-i'm not entitled to any this year as my other half works and i was working part time as well in the previous year which put me over the limit to claim...I did claim as i was told its better to start a claim early even if you know you wont get anything that year as it will make things easier next year when i can claim as i will just have to give them new figures instead of starting from scratch.

Are you sure you're not entitled to any this year? I'm guessing you applied quoting your income last year and they said your award is zero.

But that's just the initial award - there is no disregard for income drops (yet) - so if your income this year is lower than last year then you may become entitled as it'll be based on this year's earning.

Also if your business made a loss you can subtract that loss from your OH's income. See form TC825 on the HMRC site which has an example: http://www.hmrc.gov.uk/forms/tc825.pdf

Hammyman

Just to add, don't forget to carry this years loss forward so you can claim it from next years profits, thus reducing your income for tax purposes.

moneymabel

Thankyou-I have deducted my loss from OH's income this year but as he had a lot of overtime we were still over the limit. Thankyou for your help.