Help, are tax credits being dropped for anybody over £25,000 in 2012

spaceman5

Hi, i have just read on another thread somewhere, that from 2012 if you earn over £25,000, you would lose your working tax credits, does anybody know if this is correct, as we have 3 kids and would just literally be earning just over £25,000 so if this is true wold lose all our tax credits, although it not really that much we get, but we could not really afford to lose them, i knew the goverment was cutting back tax credits but thought it was for much higher earners than £25,000

TIA

bigbill

It's not quite as bad as you say, but nearly!

From April 2012 if you lose entitlement to the child part you would normally still be left with the basic family element part weekly.

From April 2012 this family element will be stopped once the child part is lost.

So for someone with one child it might well be about £25,000 when it all stops from April 2012, but for others with more than one or a disabled child it will be slightly higher before it is all lost.

There are many, many more changes hidden just like this in the pipeline thanks to the Condem party.

somethingcorporate

Not sure that average earners should be propped up with benefits, otherwise more and more is being squeezed from less and less. It's simply an unsustainable situation.

zagfles

spaceman5 wrote: »

Hi, i have just read on another thread somewhere, that from 2012 if you earn over £25,000, you would lose your working tax credits, does anybody know if this is correct, as we have 3 kids and would just literally be earning just over £25,000 so if this is true wold lose all our tax credits, although it not really that much we get, but we could not really afford to lose them, i knew the goverment was cutting back tax credits but thought it was for much higher earners than £25,000

TIA

No it's not true, there are a lot of scare stories going round spread by people who don't really understand tax credits or who use selective circumstances to highlight the worse case scenario for political reasons or just to get a good headline.

With 3 kids you might even see an increase in tax credits, since the child element is being increased quite substantially, which for larger families on average/below average incomes will more than make up for the cuts elsewhere.

With 3 kids on 25k your tax credits in 2012 will probably be about £5000 a year.

bigbill

Tax credits

• Negative: From April 2011, the second income threshold for the family element of child tax credit will reduce from £50,000 to £40,000 and, from April 2012, the family element of child tax credit will be withdrawn immediately after the child element (paragraph 2.37);
• Big Negative: From April 2011, the first and second withdrawal rates for tax credits will increase to 41 per cent (paragraph 2.38);
• Negative: From April 2011, the baby element will be removed from child tax credit and, from April 2012, the 50 plus element will be removed from working tax credit (paragraph 2.39);
• Positive: In April 2011, the child element of child tax credit will increase by £150 above CPI indexation and, in April 2012, it will increase by £60 above indexation (paragraph 2.40);
• Negative: The government will not introduce the £4 supplement in child tax credit for each child aged one and two from April 2012, which was announced in the March 2010 Budget (paragraph 2.41);
• Negative: From April 2011, the level of in-year rises of income that will be disregarded from calculations of tax credit entitlement will decrease from £25,000 to £10,000 and, from April 2013, will be redued further to £5,000 (paragraph 2.42);
• Negative: From April 2012, the period for which a tax credit claim and certain changes of circumstances can be backdated will be reduced from three months to one month (paragraph 2.43); and
• Positive: From April 2011, people aged over 60 will qualify for working tax credit if they work at least 16 hours a week, rather than 30 as now (paragraph 2.44).

6 negative changes and 2 positive

zagfles

bigbill wrote: »

Tax credits

• Negative: From April 2011, the second income threshold for the family element of child tax credit will reduce from £50,000 to £40,000 and, from April 2012, the family element of child tax credit will be withdrawn immediately after the child element (paragraph 2.37);
• Big Negative: From April 2011, the first and second withdrawal rates for tax credits will increase to 41 per cent (paragraph 2.38);
• Negative: From April 2011, the baby element will be removed from child tax credit and, from April 2012, the 50 plus element will be removed from working tax credit (paragraph 2.39);
• Positive: In April 2011, the child element of child tax credit will increase by £150 above CPI indexation and, in April 2012, it will increase by £60 above indexation (paragraph 2.40);
• Negative: The government will not introduce the £4 supplement in child tax credit for each child aged one and two from April 2012, which was announced in the March 2010 Budget (paragraph 2.41);
• Negative: From April 2011, the level of in-year rises of income that will be disregarded from calculations of tax credit entitlement will decrease from £25,000 to £10,000 and, from April 2013, will be redued further to £5,000 (paragraph 2.42);
• Negative: From April 2012, the period for which a tax credit claim and certain changes of circumstances can be backdated will be reduced from three months to one month (paragraph 2.43); and
• Positive: From April 2011, people aged over 60 will qualify for working tax credit if they work at least 16 hours a week, rather than 30 as now (paragraph 2.44).

6 negative changes and 2 positive

And there's more - those are the June budget changes only, there more changes announced in the spending review, quote from from
http://cdn.hm-treasury.gov.uk/sr2010_completereport.pdf

controlling the costs of tax credits by:
•• reducing the percentage of childcare costs that parents can claim through the childcare element of the Working Tax Credit (WTC) from 80 per cent to its
previous 70 per cent level in April 2011, saving £385 million a year by 2014-15;
•• changing the eligibility rules so that couples with children must work 24 hours a week between them, with one partner working at least 16 hours a week in order to qualify for the WTC, saving £390 million a year by 2014-15;
•• freezing the basic and 30 hour elements of the WTC for three years from 2011-12, saving £625 million a year by 2014-15; and
•• increasing the child element above indexation by a further £30 in 2011-12 and £50 in 2012-13, in addition to the £150 and £60 increases provided at the June Budget. This will ensure that the overall outcome of the Spending Review will have no measurable impact on child poverty in the next two years.

Basically the only real "positive" is the increase in the child element, but as I said for large families (3+ kids) on average or below average incomes such as the OP this increase will normally outweigh all the negatives.

bigbill

Forgot about those ones!

The excess taper is set at 39% now this will increase to 41% this one change alone will more than cancel out the child element increases for low to middle income families.

zagfles

bigbill wrote: »

Forgot about those ones!

The excess taper is set at 39% now this will increase to 41% this one change alone will more than cancel out the child element increases for low to middle income families.

It will not - unless they only have one child.

The CTC increase is 180 per child in Apr 2011 and 290 in 2012 (over inflation).

On a £25k salary with 3 kids (as in the OPs case) the increase in CTC will gain them £870 in 2012, and the increase in the withdrawal rate will cost them (25000-6420)*0.02 = £371. Net gain of almost £500.

Even with just 2 kids on a higher income of £30k, the increase in the child element would gain them £580 and the increase in withdrawal rate would cost them £471.

So those two changes combined will increase tax credits for the average size family on an average income. Larger families and/or those on lower incomes will gain even more.

Of course some will lose from the other changes eg baby element, childcare and some of the minor changes. But many families will be better off, particularly the lower paid and bigger families, such as (probably) the OP. A point which the media seemed to have missed in all the hype about cuts.

The big losers will be those who only get the family element currently, most will lose it and so have no entitlement to tax credits at all in 2012. They make up quite a large proportion of claimants (so that will reduce the bureacracy as well).

mummyroysof3

we have 3 children and my OH earns less than £16000 are we going to be worse off?

zagfles

mummyroysof3 wrote: »

we have 3 children and my OH earns less than £16000 are we going to be worse off?

You should be better off by about £600 a year - provided you aren't affected by the other changes listed most likely being the 24 hour rule, see above.

mummyroysof3

zagfles wrote: »

You should be better off by about £600 a year - provided you aren't affected by the other changes listed most likely being the 24 hour rule, see above.

my OH works 36 hours a week and i dont work, so that wont affect us will it, does it mean in a couple only 1 of you has to work more than 24?