25k disregard

Numptytoes

Hi All
I have asked on a separate thread but thought I would title it better.

Can someone please please explain this bloomin 25k disregard to me? I really don't understand it. Our tc we are currently receiving are based on last years income. HMRC wrote that they are estimating it on last years income. So if my self-employed husband earns more this tax year than last does that mean we wont have been overpaid? I really dont get it and would be grateful for any help. Thank you

zagfles

1) your tax credits are initially based on last year's income
2) as long as your income doesn't rise by more than the disregard (25k this year, 10k next year), you won't have an overpayment
3) if your income goes down this year you can claim more
4) you might have an overpayment in your "run-on" payments - ie payments between the start of the tax year and when they process your renewal - because these are initially based on income for 2 tax years ago. They'll take these out of your payments for the rest of the year.

So you can get a lot more in tax credits if you have a variable income!

They are going to introduce a disregard for income falls in 2012 or 2013 I think (but only about 2500 or so).

Lovelamour

Ah I have been asking this question on another thread!!! So that means if my se partner earns around 8k more in this tax year as our tc are based on LAST years income we wont have to pay back any of the payments we have received Apr 10-Apr2011? Obviously Apr 2011 our payments will decrease I am well aware of that.......

zagfles

Lovelamour wrote: »

Ah I have been asking this question on another thread!!! So that means if my se partner earns around 8k more in this tax year as our tc are based on LAST years income we wont have to pay back any of the payments we have received Apr 10-Apr2011? Obviously Apr 2011 our payments will decrease I am well aware of that.......

Yes that's right.

Lovelamour

zagfles wrote: »

Yes that's right.

Thank you so much, I have been worrying sick about this. Seems a little flawed to me but I suppose it stops huge overpayments. Thank you

AimeesMum_2

You won't have an overpayment in April but as it can take some time for your new award to be calculated, you will have an overpayment from April until your new award is calculated. Your tax credits will not decrease until you complete your annual renewal pack.

Lovelamour

AimeesMum wrote: »

You won't have an overpayment in April but as it can take some time for your new award to be calculated, you will have an overpayment from April until your new award is calculated. Your tax credits will not decrease until you complete your annual renewal pack.

Okay thanks so I will just keep any money they give me from April onwards to give back to them if needed then? Thanks for your help

Lovelamour

Will TC always work a year behind? Have they always done this? Just curious if this is how they manage to avoid overpayments based on income? I read somewhere the 25k disregard is being phased out but hopefully now the recession is lifting (ha ha) we won't need so much help from tc!

AimeesMum_2

Lovelamour wrote: »

Okay thanks so I will just keep any money they give me from April onwards to give back to them if needed then? Thanks for your help

It will be taken from your new award so no need to keep the payments - I always do my renewal as soon as possible so it's the least that it can be. It is divided up by the number of weeks left in the year. Last year I had an overpayment of £300 so they just deducted it from my annual total and split all payments equally.

There's no need to worry at all though

I believe that tax credits has always been worked out a year behind as this is the accurate information and helps stop fraudulent claims. If your income goes up by more than £25,000 this year than last year then you must inform tax credits as your payments will decrease. This is being reduced to £10,000 in April x

zagfles

Lovelamour wrote: »

Will TC always work a year behind? Have they always done this? Just curious if this is how they manage to avoid overpayments based on income? I read somewhere the 25k disregard is being phased out but hopefully now the recession is lifting (ha ha) we won't need so much help from tc!

It used to be just 2500 but because of the overpayments farce the last govt massively increased it (at great cost to the taxpayer) to try to avoid so many overpayment cases.

This govt have some sort of plan to link tax credits to PAYE which should help if it works. Not much help for the SE but then they have to sort out their tax affairs too.

backinbusiness

Zagfles

I and many others are grateful for your TC insight.

Did you work for TCO - 'cos many people find the system just far too complicated!

BiB