Tax credits - will I have an overpayment?

Bradbrown

The reason our income has jumped is cause one of has gone back out to work after taking a break to look after our child - we were on my income of 30k and our now on 60k with two wages coming in

How does the income disregard effect this?

DanE2010

If your award was auto renewed then you confirmed your income was within the bandings - therefore your entitlement for this year is correct and it is the next tax year where you will recieve a nil award, no overpayment, we dont know what your income bands were so can only go by what your saying, was your py income in the bandings?

zagfles

Bradbrown wrote: »

The reason our income has jumped is cause one of has gone back out to work after taking a break to look after our child - we were on my income of 30k and our now on 60k with two wages coming in

How does the income disregard effect this?

To try to put this as simply as possible (which isn't easy for any Gordon Brown scheme!):

The income on which you assessed for tax credits is the lower of last tax year's income and this tax year's income, unless this year's income exceeds last year's income by more than the disregard, in which case it's this year's income minus the disregard.

Eg 2009/10 income £40k, 2010/11 income £60k - 2010/11 tax credits assessed on £40k income.

2009/10 income £30k, 2010/11 income £60k - 2010/11 tax credits assessed on £35k income.

They are introducing a disregard for income falls but don't think that's till 2012.

Bradbrown

But I still don't understand how they would work it out if they don't know my exact income from 2009/2010 - surely they would need to know that to work out the disregard

A figure of less than 50k is not accurate enough to work on.

zagfles

Bradbrown wrote: »

But I still don't understand how they would work it out if they don't know my exact income from 2009/2010 - surely they would need to know that to work out the disregard

A figure of less than 50k is not accurate enough to work on.

Yes it is.

If you auto-renewed because your income was in the "family element" only band (which is £545 a year), then you are still entitled to this provided your income doesn't exceed £75k - as the family element starts being withdrawn at £50k.

So if last year's income is less than £50k AND this year's is less than £75k, the income on which you assessed will be less than £50k and so you are entitled to the family element in full.

Bradbrown

So the tax credits people will just accept my estimate for this year's income or will I have to provide them with the exact figure?

zagfles

Bradbrown wrote: »

So the tax credits people will just accept my estimate for this year's income or will I have to provide them with the exact figure?

Not sure, normally they'd need the exact figure on renewal if it was between £50k-£58k, but because of the changes in April, if your income this year is anything between 42k-75k they don't need to know - as income in that band confirms your entitlement to the family element in full in 10/11 and zero initial entitlement in 11/12.

They might do an auto-renewal with 42k-75k being the default, in which case you won't need to do anything and tax credits will stop.

Bradbrown

Ah, thanks for that.

Bradbrown

Just out of interest - anyone know what would happen if your wages weere over 75k?

zagfles

Bradbrown wrote: »

Just out of interest - anyone know what would happen if your wages weere over 75k?

What you were worried about in the first place - there'd be an overpayment and you'd have to pay back some or all of this year's tax credits.